Listed below are several transactions that took place during the first two years of operations for the law firm of Perez Associates. Year 1 Year 2 Amounts billed to clients for services rendered $ 180,000 $ 230,000 Cash collected from clients 155,000 185,000 Cash disbursements: Salaries paid to employees for services rendered during the year 85,000 95,000 Utilities 27,500 35,000 Purchase of insurance policy 58,500 0 In addition, you learn that the firm incurred utility costs of $32,500 in year 1, that there were no liabilities at the end of year 2, no anticipated bad debts on receivables, and that the insurance policy covers a three-year period. Required: 1. & 3. Calculate the net operating cash flow for years 1 and 2 and determine the amount of receivables from clients that the firm would show in its year 1 and year 2 balance sheets prepared according to the accrual accounting model. 2. Prepare an income statement for each year according to the accrual accounting model.
Listed below are several transactions that took place during the first two years of operations for the law firm of Perez Associates. Year 1 Year 2 Amounts billed to clients for services rendered $ 180,000 $ 230,000 Cash collected from clients 155,000 185,000 Cash disbursements: Salaries paid to employees for services rendered during the year 85,000 95,000 Utilities 27,500 35,000 Purchase of insurance policy 58,500 0 In addition, you learn that the firm incurred utility costs of $32,500 in year 1, that there were no liabilities at the end of year 2, no anticipated bad debts on receivables, and that the insurance policy covers a three-year period. Required: 1. & 3. Calculate the net operating cash flow for years 1 and 2 and determine the amount of receivables from clients that the firm would show in its year 1 and year 2 balance sheets prepared according to the accrual accounting model. 2. Prepare an income statement for each year according to the accrual accounting model.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Listed below are several transactions that took place during the first two years of operations for the law firm of Perez Associates.
| Year 1 | Year 2 | |
|---|---|---|
| Amounts billed to clients for services rendered | $ 180,000 | $ 230,000 |
| Cash collected from clients | 155,000 | 185,000 |
| Cash disbursements: | ||
| Salaries paid to employees for services rendered during the year | 85,000 | 95,000 |
| Utilities | 27,500 | 35,000 |
| Purchase of insurance policy | 58,500 | 0 |
In addition, you learn that the firm incurred utility costs of $32,500 in year 1, that there were no liabilities at the end of year 2, no anticipated
Required:
1. & 3. Calculate the net operating
2. Prepare an income statement for each year according to the accrual accounting model.
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