Listed below are several transactions that took place during the second

jagguarpaw January 19, 2017 0 Comments

Question: Listed below are several transactions that took place…

Listed below are several transactions that took place during the second and third years of operations for RPG Consulting.

 

Year 2 Year 3
  Amounts billed to customers for services rendered $ 420,000 $ 520,000
  Cash collected from credit customers 330,000 470,000
  Cash disbursements:
       Payment of rent 87,000 0
       Salaries paid to employees for services rendered during the year 147,000 167,000
       Travel and entertainment 37,000 47,000
       Advertising 18,500 42,000
In addition, you learn that the company incurred advertising costs of $32,000 in year 2, owed the advertising agency $5,700 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.

Year 2 Year 3
Revenues 420000 520000
Expenses:
Rent
Salaries
Travel and Entertainment
Advertising
Net Income

 

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.

Advertising liability at end of year 2