Kemp Co. must determine the December 31, year 2 yearend
accruals for advertising and rent expenses. A $500 advertising
bill was received January 7, year 3, comprising costs of $375
for advertisements in December year 2 issues, and $125 for advertisements
in January year 3 issues of the newspaper.
A store lease, effective December 16, year 1, calls for fixed
rent of $1,200 per month, payable one month from the effective
date and monthly thereafter. In addition, rent equal to 5% of net
sales over $300,000 per calendar year is payable on January 31 of
the following year. Net sales for year 2 were $550,000.
In its December 31, year 2 balance sheet, Kemp should report
accrued liabilities of