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

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.

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’s balance sheet at the end of year2.

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Year 2 Year 3 Amounts billed to customers for services rendered Cash collected from credit customers Cash disbursements: $350,000 $450,000 260,000 400,000 Payment of rent Salaries paid to employees for services rendered during the year Travel and entertainment Advertising 80,000 140,000 30,000 15,000 160,000 40,000 35,000