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 $ 440,000 $ 540,000

Cash collected from credit customers 350,000 490,000

Cash disbursements: Payment of rent 89,000 0

Salaries paid to employees for services rendered during the year 149,000 169,000

Utilities 39,000 49,000

Advertising 19,500 44,000

In addition, you learn that the company incurred advertising costs of $34,000 in year 2, owed the advertising agency $5,900 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 RPGs balance sheet at the end of year 2.