Calculate accrual net income for the year

Harman-Kardon Consulting CompanyIncome Statement Year 1

Fees Revenue ($330,000 + $52,000) $382,000Expenses:

Rent Expense (19,000)Salaries Expense (124,000)Utilities Expense ($42,000 + $1,100) (43,100)

Total expenses (186,100)Net Income (loss) $195,900

Cash flows during the first year of operations for the Harman-Kardon Consulting Company were as follows: Cash collected from customers, $330,000; Cash paid for rent, $38,000; Cash paid to employees for services rendered during the year, $124,000; Cash paid for utilities, $42,000.

In addition, you determine that customers owed the company $52,000 at the end of the year and no bad debts were anticipated. Also, the company owed the gas and electric company $1,100 at year-end, and the rent payment was for a two-year period

Year 1 Year 2Amounts billed to customers for services rendered $200,000 $210,000

Cash collected from customers 193,500 206,500 Cash disbursements:

Salaries paid to employees for services rendered during the year 65,000 75,000 Utilities 30,000 50,000 Purchase of insurance policy 48,000 0

1) Calculate the net operating cash flow for years 1 and 2

Net cash provided by operating activities: Year 1 Year 2Cash collected from customers $193,500 $206,500Cash paid for salaries (65,000) (75,000)Cash paid for utilities (30,000) (50,000)Cash paid for insurance (48,000) 0Cash provided by operating activities $50,500 $81,500

Listed below are several transactions that took place during the first two years of operations for the law firm of Pete, Pete, and Roy.

In addition, you learn that the company incurred utility costs of $40,000 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.

Year 1 Year 2Amounts billed to customers for services rendered $200,000 $210,000

Cash collected from customers 193,500 206,500 Cash disbursements:

Salaries paid to employees for services rendered during the year 65,000 75,000 Utilities 30,000 50,000 Purchase of insurance policy 48,000 0

In addition, you learn that the company incurred utility costs of $40,000 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.

2) Prepare an income statement for each year according to the accrual accounting model.

Pete, Pete and Roy, LLCIncome Statement Year 1 Year 2

Legal fees revenue $200,000 $210,000Expenses:

Salaries expense (65,000) (75,000)Utilities expense (40,000) (40,000)Insurance expense (16,000) (16,000)

Total expenses (121,000) (131,000)Net Income (loss) $79,000 $79,000

Year 1 Year 2Amounts billed to customers for services rendered $200,000 $210,000

Cash collected from customers 193,500 206,500 Cash disbursements:

Salaries paid to employees for services rendered during the year 65,000 75,000 Utilities 30,000 50,000 Purchase of insurance policy 48,000 0

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.

200,000193,500

6,500

210,000206,500

10,000

Accounts Receivable

Year 2 Year 3Amounts billed to customers for services rendered $381,000 $490,000

Cash collected from customers 168,000 435,000 Cash disbursements:

Payment of rent 87,000 0 Cash paid to employees for services rendered during the year 192,000 107,000

Travel and entertainment 20,500 49,000 Advertising 16,500 38,000

1) Calculate accrual net income for both years.Income Statement RPG Consulting

Revenues $381,000 $490,000Expenses:

Rent (43,500) (43,500)Salaries (192,000) (107,000)Travel and entertainment (20,500) (49,000)Advertising (28,500) (20,800)

Total expenses (284,500) (220,300)Net Income (loss) $96,500 $269,700

In addition, you learn that the company incurred advertising costs of $28,500 in year 2, owed the advertising agency $5,200 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

Year 2 Year 3

Listed below are several transactions that took place during the second two years of operations for RPG Consulting.

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

Year 2 Year 3Cash disbursements:

Advertising 16,500 38,000

Income Statement RPG Consulting

Advertising (28,500) (20,800)

In addition, you learn that the company incurred advertising costs of $28,500 in year 2, owed the advertising agency $5,200 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

Year 2 Year 3

5,20016,500 28,500

17,20038,000 20,800

0

Advertising Payable

Revenues $300,000 Expenses:      Cost of goods sold $100,000       Salaries 13,000      Interest 4,500      Insurance 2,700 120,200Income before tax 179,800      Income tax at 40% 71,920Earnings after interest and taxes $107,880

Alpaca Corporation had revenues of $300,000 in its first year of operations. They have not collected on $20,000 of their sales, and still owe $25,500 on $100,000 of merchandise they purchased. The company had no inventory on hand at the end of the year. The company paid $13,000 in salaries. Owners invested $27,000 in the business and $27,000 was borrowed on a five-year note. The company paid $4,500 in interest that was the amount owed for the year, and paid $5,400 for a two-year insurance policy on the first day of business. Alpaca has an effective income tax rate of 40%.

Compute earnings after interest and taxes.

Revenues $372,000 Expenses:      Cost of goods sold $200,000       Salaries 33,600      Interest 3,500      Insurance 4,700 241,800Income before tax $130,200

Tri Fecta, a partnership, had revenues of $372,000 in its first year of operations. The partnership has not collected on $45,300 of its sales, and still owes $39,200 on $200,000 of merchandise they purchased. There was no inventory on hand at the end of the year. The partnership paid $33,600 in salaries. The partners invested $45,000 in the business and $30,000 was borrowed on a five-year note. The partnership paid $3,500 in interest that was the amount owed for the year and paid $9,400 for a two-year insurance policy on the first day of business.

Compute net income for the first year for Tri Fecta. Ignore income taxes.