Listed below are several transactions that took place during thesecond and third years of...

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Accounting

Listed below are several transactions that took place during thesecond and third years of operations for RPG Company.
Year 2 Year 3
Amounts billed to customers for services rendered $400,000$500,000
Cash collected from credit customers 310,000 450,000
Cash disbursements:
Payment of rent 85,000 0
Salaries paid to employees for services rendered during the year145,000 165,000
Travel and entertainment 35,000 45,000
Advertising 17,500 40,000
In addition, you learn that the company incurred advertisingcosts of $30,000 in year 2, owed the advertising agency $5,500 atthe end of year 1, and there were no liabilities at the end of year3. Also, there were no anticipated bad debts on receivables, andthe 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 beshown as a liability on RPG's balance sheet at the end of year2.

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4.3 Ratings (645 Votes)

	year 2	year3
Service revenue	400000	500000
less;expense
Rent expense [85000/2]	(42500)	(42500)
salaries	(145000)	(165000)
Travel and entertainment	(35000)	(45000)
advertising	(30000)	(22000)


net income	147500	225500

**Advertising liability at end of year 2 = Beginning liability+ incurred during the year2 - paid

= 5500+ 30000-17500

= 18000

advertising cost incurred during year3 = ending liability+ cash paid -beginning

= 0 + 40000-18000

= 22000

2)Amount of advertising liability shown on balancesheet at end of year2 = Beginning liability+ incurred during the year2 - paid

= 5500+ 30000-17500

= 18000

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In: AccountingListed below are several transactions that took place during thesecond and third years of operations...Listed below are several transactions that took place during thesecond and third years of operations for RPG Company.Year 2 Year 3Amounts billed to customers for services rendered $400,000$500,000Cash collected from credit customers 310,000 450,000Cash disbursements:Payment of rent 85,000 0Salaries paid to employees for services rendered during the year145,000 165,000Travel and entertainment 35,000 45,000Advertising 17,500 40,000In addition, you learn that the company incurred advertisingcosts of $30,000 in year 2, owed the advertising agency $5,500 atthe end of year 1, and there were no liabilities at the end of year3. Also, there were no anticipated bad debts on receivables, andthe 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 beshown as a liability on RPG's balance sheet at the end of year2.