Reference no: EM132630722
Question - 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 $300,000 $400,000
Cash collected from credit customers 210,000 350,000
Cash disbursements: Payment of rent 75,000 0
Salaries paid to employees for services rendered during the year 135,000 155,000
Utilities 25,000 35,000
Advertising 12,500 30,000
In addition, you learn that the company incurred advertising costs of $20,000 in year 2, owed the advertising agency $4,500 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.
3. Calculate accrual net income for both years.