Year 2 Year 3
Amounts billed to customers for services rendered $350,000 $450,000
Cash collected from credit customers $260,000 $450,000
Cash disbursements:
Payment of Rent $80,000 $0
Salaries paid to employees $140,000 $160,000
Travel and entertainment $30,000 $40,000
Advertising $15,000 $35,000
In addition, you learn that the company incurred advertising costs of $25,000 in year 2, owed the advertising agency $5,000 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.
1. Calculate accrual 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.
Amounts billed to customers for services rendered $350,000 $450,000
Cash collected from credit customers $260,000 $450,000
Cash disbursements:
Payment of Rent $80,000 $0
Salaries paid to employees $140,000 $160,000
Travel and entertainment $30,000 $40,000
Advertising $15,000 $35,000
In addition, you learn that the company incurred advertising costs of $25,000 in year 2, owed the advertising agency $5,000 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.
1. Calculate accrual 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.