Question

Exercise 1-2 (Algo) Accrual accounting (L01-2) Listed below are several transactions that took place during the second and third years of operations for the RPG Company. Year 2 Year 3 $250,000 $350,000 160,000 300,000 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 Utilities Advertising 70,000 130,000 20,000 10,000 150,000 30,000 25,000 In addition, you learn that the company incurred advertising costs of $15,000 in year 2, owed the advertising agency $4,000 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 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate accrual net income for both years. Year 3 Year 2 250,000 S Revenues $ 350,000 Expenses: Rent Salaries Utilities 35,000 130,000 20,000 15,000 50,000 35.000 150,000 30,000 16,000 119.000 Advertising Net income S $ Required 2 >

Answer 1

1
	Year 2	Year 3
Revenues	250000	350000
Expenses:
Rent	35000	35000
Salaries	130000	150000
Utilities	20000	30000
Advertising	15000	16000
Net income	50000	119000
2
Advertising liability at the end of Year 2	9000	=4000+15000-10000
Workings:
Advertising expense Year 3	16000	=25000-9000