A list of several transactions that took place during two years of operations for RPG consulting.
Year 2 Year 3
Amounts billed to customers for services rendered 350,000 450,000
Cash collected from credit customers 260,000 400,000
Cash disbursements:
Payement of rent 80,000 0
Salaries paid to employees for services rendered during the year 140,000 160,000
Travel and entertainment 30,000 40,000
Advertising 15,000 35,000
The company incurred advertsing costs of 25,000 in year 2, owed the advertising agency 5,000 at the end of year 1, and there were no liabilites 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.
1. Calculate accural net income for both years.
2. Determine the amount due the advertising agency that would be shown as a liability on the RPG's balance sheet at the end of year 2.