Answer:
1. Computation of Net Operating Cash flow
Particulars Year 1 $ Year 2 $
<u>Net Operating Cash flow</u>
Cash collected from clients $167,000 $197,000
Less: Cash Disbursement
Salaries $97,000 $107,000
Utilities $33,500 $47,000
Purchase of insurance policies $62,100 $0
Net Operating Cash Flow -$25,600 $43,000
Therefore, net operating cash flow for year 1 is -$25,600 and year 2 is $43,000.
2. Income Statement for each year
Particulars Year 1 $ Year 2 $
Revenue $184,000 $234,000
Expenses:
Salaries $97,000 $107,000
Utilities $38,500 $42,000
Insurance Policy($62, 100/3) $20,700 $20,700
Net Income $27,800 $64,300
Working:
Utilities for year 2 = $33,500 + $47,000 - $38,500 = $42,000
3. Computation of account receivables
Particulars Year 1 $ Year 2 $
Account receivables beginning balance $0 $17,000
Add: Account billed to client $184,000 $234,000
Less: Cash collections from clients $167,000 $197,000
Ending account receivables $17,000 $54,000
Therefore, net amount of account receivables for year 1 is $17,000 and year 2 is $54,000
