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
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Cash disbursements: Payment of rent 80,000 0 Salaries paid to employees for services rendered during the year 140,00 0 160,00 0 Travel and entertainment 30,000 40,000 Advertising 15,000 35,000 In addition, you learn that the company incurred advertising costs of $25,000 in year 2, owed the advertising agency $5,000 at the end of year 1, and there were no liabilities at the end of year 3. Also, there were no anticipated bad debts on receivables, and the rent payment was for a two- year period, year 2 and year 3. Required: (1 ) Calculate accrual net income for both years. (Amounts to be deducted should be indicated with minus sign. Omit the "$" sign in your response.) Year 2 Year 3 Revenue s $ 350,000 $ 450,000 Expense s: Rent Salaries Trav el and entertain ment Adve rtising N et Income $ $ (2) Determine the amount due to the advertising agency that would be shown as a liability on the RPG’s balance sheet at the end of year 2. (Input the amount as positive value. Omit the "$" sign in your response.)
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Advertising expense in year three $ Explanation: (1) Rent = ($80,000 ÷ 2) = (40,000) (2) Amount owed at the end of year one $ 5,000 Advertising costs incurred in year two 25,000
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This note was uploaded on 03/06/2011 for the course ACCT 301 taught by Professor Donald during the Spring '11 term at New Mexico Junior College.

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

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