E1-2 Accrual accounting LO1-2 Listed below are several transactions that took place during the second and third years of operations for the RPG Company. Amounts billed to customers for services rendered Cash collected from credit customers Cash disbursements: Payment of rent Salaries paid to employees for services rendered during the year Travel and entertainment Advertising Year 2 $350,000 260,000 80,000 140,000 30,000 15,000 Year 3 $450,000 400,000 -0- 160,000 40,000 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 antici- pated 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. 2. Determine the amount due the advertising agency that would be shown as a liability on RPG's balance sheet at the end of year 2.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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E 1-2
Accrual
accounting
LO1-2
Listed below are several transactions that took place during the second and third years of operations for the RPG
Company.
Amounts billed to customers for services rendered
Cash collected from credit customers
Cash disbursements:
Payment of rent
Salaries paid to employees for services rendered during the year
Travel and entertainment
Advertising
Year 2
$350,000
260,000
80,000
140,000
30,000
15,000
Year 3
$450,000
400,000
-0-
160,000
40,000
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 antici-
pated 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.
2. Determine the amount due the advertising agency that would be shown as a liability on RPG's balance sheet
at the end of year 2.
Transcribed Image Text:E 1-2 Accrual accounting LO1-2 Listed below are several transactions that took place during the second and third years of operations for the RPG Company. Amounts billed to customers for services rendered Cash collected from credit customers Cash disbursements: Payment of rent Salaries paid to employees for services rendered during the year Travel and entertainment Advertising Year 2 $350,000 260,000 80,000 140,000 30,000 15,000 Year 3 $450,000 400,000 -0- 160,000 40,000 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 antici- pated 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. 2. Determine the amount due the advertising agency that would be shown as a liability on RPG's balance sheet at the end of year 2.
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