Listed below are several transactions that took place during the second and third years of operations for the RPG Company.     Year 2 Year 3 Amounts billed to customers for services rendered $ 400,000   $ 500,000   Cash collected from credit customers   310,000     450,000   Cash disbursements:             Payment of rent   85,000     0   Salaries paid to employees for services rendered during the year   145,000     165,000   Utilities   35,000     45,000   Advertising   17,500     40,000       In addition, you learn that the company incurred advertising costs of $30,000 in year 2, owed the advertising agency $5,500 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. 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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Listed below are several transactions that took place during the second and third years of operations for the RPG Company.
 

  Year 2 Year 3
Amounts billed to customers for services rendered $ 400,000   $ 500,000  
Cash collected from credit customers   310,000     450,000  
Cash disbursements:            
Payment of rent   85,000     0  
Salaries paid to employees for services rendered during the year   145,000     165,000  
Utilities   35,000     45,000  
Advertising   17,500     40,000  
 

 
In addition, you learn that the company incurred advertising costs of $30,000 in year 2, owed the advertising agency $5,500 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.
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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