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# Homework 1 - Chapter 02 Review of the Accounting Process...

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1. value: 10 points Exercise 1-1 Accrual accounting [LO2] Listed below are several transactions that took place during the first two years of operations for the law firm of Pete, Pete, and Roy. Year 1 Year 2 Amounts billed to customers for services rendered \$ 170,00 0 \$ 220,00 0 Cash collected from customers 160,00 0 190,00 0 Cash disbursements: Salaries paid to employees for services rendered during the year 90,000 100,00 0 Utilities 30,000 40,000 Purchase of insurance policy 60,000 0 In addition, you learn that the company incurred utility costs of \$35,000 in year one, that there were no liabilities at the end of year two, no anticipated bad debts on receivables, and that the insurance policy covers a three-year period. Required: (1) Calculate the net operating cash flow for years 1 and 2. (Negative amounts should be indicated by a minus sign. Omit the "\$" sign in your response.) Year 1 Year 2 Net operating cash flow \$ \$ (2) Prepare an income statement for each year according to the accrual accounting model. (Amounts to be deducted should be indicated with minus sign. Omit the "\$" sign in your response.)

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Pete, Pete, and Roy Income Statements Year 1 Year 2 Revenues \$ \$ Expenses: Salaries Utilities Insurance Net income \$ \$ (3) Determine the amount of receivables from customers that the company would show in its year 1 and year 2 balance sheets prepared according to the accrual accounting model. (Omit the "\$" sign in your response.) Year 1 Year 2 Receivables \$ \$ 2. value: 10 points Exercise 1-2 Accrual accounting [LO2] Listed below are several transactions that took place during the second two years of operations for RPG Consulting. Year 2 Year 3 Amounts billed to customers for services rendered \$ 350,00 0 \$ 450,00 0 Cash collected from credit customers 260,00 0 400,00 0