On October 4, Campbell Corporation purchased 10 days of advertising from Hamilton Agency. Campbell reports periodically...
On October 4, Campbell Corporation purchased 10 days of advertising from Hamilton Agency. Campbell reports periodically every month. How should the prepaid advertising be recorded?
| A. |
as an expense |
|
| B. |
as a liability |
|
| C. |
as an equity item |
|
| D. |
as an asset |
Homework Answers
Prepaid advertising is nothing but future Expense which is paid earlier. This is an asset to the business, as this advance payment gives right to us to demand advertising service
Do Option D - as an asset
Validation :
It is not an expense as this doesn't belong to current period. This is also not a liability, as we do not have any obligation. This is not at an equity item, only owners stake is considered equity.
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Balance Sheet
January 1, 2016
1
Cash
$30,000.00
Accounts payable
$20,000.00
2
Accounts receivable
80,000.00
Bonds payable
120,000.00
3
Marketable securities (short-term)
40,000.00
Pension liability
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4
Inventory
100,000.00
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5
Property, plant, and equipment (net)
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6
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Balance Sheet
January 1, 2016
1
Cash
$30,000.00
Accounts payable
$20,000.00
2
Accounts receivable
80,000.00
Bonds payable
120,000.00
3
Marketable securities (short-term)
40,000.00
Pension liability
50,000.00
4
Inventory
100,000.00
Common stock
200,000.00
5
Property, plant, and equipment (net)
200,000.00
Retained earnings
60,000.00
6
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held company) and discovers the following about Hamilton:
a.
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