prepare an income statement and a statement of cash flows for both year 1 and year 2 614300

Cash and accrual accounting: comparison of performance measures

Peters Company was in business for two years, during which time it entered into the following transactions:

Year 1:

1. The owners contributed $24,000 cash.
2. At the beginning of the year, rented a warehouse for two years with a prepaid rent payment of $12,000.
3. Purchased $10,000 of inventory on account.
4. Sold half the inventory for $24,000, receiving $20,000 in cash and an account receivable of $4,000.
5. Paid wages of $6,000 and also accrued wages payable of $4,000.

Year 2:

1. Paid the outstanding balance for the inventory purchased in Year 1.
2. Paid the outstanding wages payable balance.
3. Sold the remaining inventory for $30,000 cash.
4. Received full payment on the outstanding accounts receivable.
5. Incurred and paid wages of $12,000.
6. Returned the cash balance to the owners and shut down operations.

a. Prepare an income statement and a statement of cash flows for both Year 1 and Year 2.

b. Complete a chart like the following.