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

Year 2 Year 3

Amounts billed to customers for services rendered $270,000 $370,000

Cash collected from credit customers 180,000 320,000

Cash disbursements:

Payment of rent 72,000 0

Salaries paid to employees for services rendered during the year 132,000 152,000

Travel and entertainment 22,000 32,000

Advertising 11,000 27,000

In addition, you learn that the company incurred advertising costs of $17,000 in year 2, owed the advertising agency $4,200 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 RPGs balance sheet at the end of year 2.