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Determine the amount due the advertising agency

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Reference no: EM132622535

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 $380,000 $480,000
Cash collected from credit customer 290,000 430,000
Cash disbursements: Payment of rent 83,000 0
Salaries paid to employees for services rendered during the year 143,000 163,000
Utilities 33,000 43,000
Advertising 16,500 38,000

In addition, you learn that the company incurred advertising costs of $28,000 in year 2, owed the advertising agency $5,300 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:

Question 1. Calculate accrual net income for both years.

Question 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.

Reference no: EM132622535

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