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 RPG’s balance sheet at the end of year 2.