Listed below are several transactions that took place during the second and thir
ID: 2341365 • Letter: L
Question
Listed below are several transactions that took place during the second and third years of operations for RPG Company. Year 3 $ 430, 000 530, 000 480, 000 Year 2 Amounts billed to customers for services rendered Cash collected from credi t customers Cash disbursements: Payment of rent Salaries paid to employees for services rendered during the year Travel and entertainment Advertising 340, 000 88, 000 148,000 38, 000 19,000 168, 000 48, 000 43, 000 In addition, you learn that the company incurred advertising costs of $33,000 in year 2, owed the advertising agency $5,800 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 2Explanation / Answer
(1)
Year 2
Year 3
Revenues
430000
530000
Expenses:
Rent
44000
44000
Salaries
148000
168000
Travel & Entertainment
38000
48000
Advertising
33000
23200*
Net Income
167000
246800
*43000 - [(33000 – 19000) + 5800]
(2) Advertising Liability at the end of year 2 = (33000 – 19000) + 5800 = $19800
Year 2
Year 3
Revenues
430000
530000
Expenses:
Rent
44000
44000
Salaries
148000
168000
Travel & Entertainment
38000
48000
Advertising
33000
23200*
Net Income
167000
246800