Ask Question
19 September, 05:40

Amounts billed to clients for services rendered $ 172,000 $ 222,000 Cash collected from clients 159,000 189,000 Cash disbursements Salaries paid to employees for services rendered during the year 89,000 99,000 Utilities 29,500 39,000 Purchase of insurance policy 59,700 0 In addition, you learn that the firm incurred utility costs of $34,500 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.

+1
Answers (1)
  1. 19 September, 05:55
    0
    balance sheet accounts receivable:

    year 1 13,000

    year 2 46,000

    Cash flow year 1 year 2

    collected from client 159,000 189,000

    salaries paid (89,000) (99,000)

    utilities (29,500) (39,000)

    purhcase of insurance (59,700)

    net (19,200) 51,000

    Income statement year 1 year 2

    Sales revenue 172,000 222,000

    Salaries expense (89,000) (99,000)

    Utilities expense (34,500) (34,500) *

    Insurance expense (19,900) (19,900)

    Net income 28,600 68,600

    Explanation:

    balance sheet accounts receivable:

    year 1: sales - collected 172,000 - 159,000 = 13,000

    year 2: beginning balance + sales - collected

    13,000 + 222,000 - 189,000 = 46,000

    Cash flow: we subtract from the amount collected the cash disbursements.

    The income statment will be done based on the amount billed and the expenses accrued during each period, regardless of the time of collection/payment

    *Utilities expense:

    year 1 incurrent 34,500 cost and paid 29,000 so there is a 4,500 payable which is set on year 2.

    *Insurance expense:

    59,700 is thecost for three years, so we divide by three to get the value of one year. 59,700 / 3 = 19,900
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Amounts billed to clients for services rendered $ 172,000 $ 222,000 Cash collected from clients 159,000 189,000 Cash disbursements Salaries ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers