Question

Listed below are several transactions that took place during the second and third years of operations for RPG Company. Year 2 Year 3 $440,000 $540,000 350,000 490,000 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 Travel and entertainment Advertising 89,000 149,00 169,000 39,000 49,000 19,500 44,00 In addition, you learn that the company incurred advertising costs of $34,000 in year 2, owed the advertising agency $5,900 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

Answer 1

1
	Year 2	Year 3
Revenues	440000	540000
Expenses:
Rent	44500	44500
Salaries	149000	169000
Travel and Entertainment	39000	49000
Advertising	34000	23600
Net income	173500	253900
2
Advertising liability at end of Year 2	20400	=34000-(19500-5900)