Thanks for the quick response! This the Question. Exercise 1-2 Accrual accountin
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Thanks for the quick response! This the Question.Exercise 1-2 Accrual accounting [LO1-2]
Listed below are several transactions that took place during the second 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 $260000 $400000
Cash Disbursement:
Payment of rent 80000 0
Salaries paid to employees for services rendered through the yr. 140000 160000
Traveling and Entertainment 30000 40000
Advertising 15000 35000
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 anticipatedCash collected from credit customers 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 the RPG
Explanation / Answer
1)
Year 2
Year 3
Revenues
$
350,000
$
450,000
Expenses:
Rent
-40,000
-40,000
Salaries
-140,000
-160,000
Travel and entertainment
-30,000
-40,000
Advertising
-25,000
-20,000
Net Income
$
115,000
$
190,000
2)
Amount owed at the end of year one
$ 5,000
Advertising costs incurred in year two
25,000
30,000
Amount paid in year two
(15,000)
Liability at the end of year two
15,000
Less cash paid in year three
(35,000)
Advertising expense in year three
$ 20,000
1)
Year 2
Year 3
Revenues
$
350,000
$
450,000
Expenses:
Rent
-40,000
-40,000
Salaries
-140,000
-160,000
Travel and entertainment
-30,000
-40,000
Advertising
-25,000
-20,000
Net Income
$
115,000
$
190,000
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