Listed below are several transactions that took place during the second and third years of operations for the RPG Company. Year 2 Year 3 Amounts billed to customers for services rendered $ 350,000 $ 450,000 Cash collected from credit customers 260,000 400,000 Cash disbursements: Payment of rent 80,000 0 Salaries paid to employees for services rendered during the year 140,000 160,000 Utilities 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. 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 2. Accrual Income: Year 2 Year 3 Revenue Less: Expenses: Rent Salaries Travel and entertainment Advertising (as per calculation below) total expenses Net Income
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Listed below are several transactions that took place during the second and third years of operations for the RPG Company.
| Year 2 | Year 3 | |||||
| Amounts billed to customers for services rendered | $ | 350,000 | $ | 450,000 | ||
| Cash collected from credit customers | 260,000 | 400,000 | ||||
| Cash disbursements: | ||||||
| Payment of rent | 80,000 | 0 | ||||
| Salaries paid to employees for services rendered during the year | 140,000 | 160,000 | ||||
| Utilities | 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
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 2.
Accrual Income:
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Year 2 |
Year 3 |
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Revenue |
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Less: Expenses: |
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Rent |
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Salaries |
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Travel and entertainment |
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Advertising (as per calculation below) |
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total expenses |
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Net Income |
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