During the current accounting period, Malibar Farms Company paid $2,000 for advertising services in advance of receiving them. Prepaid Advertising was debited and Cash was credited for $2,000. At the end of the accounting period, three-fourths of the services paid for had been received. The proper adjusting entry is: Select one: A. Prepaid Advertising 1,500 Advertising Expense 1,500 B. Advertising Expense 500 Prepaid Advertising 500 C. Advertising Expense 1,500 Prepaid Advertising 1,500 D. Prepaid Advertising 500 Advertising Expense 500

Question

Angeline Moyer

Business

30 July, 21:58

During the current accounting period, Malibar Farms Company paid $2,000 for advertising services in advance of receiving them. Prepaid Advertising was debited and Cash was credited for $2,000. At the end of the accounting period, three-fourths of the services paid for had been received. The proper adjusting entry is: Select one: A. Prepaid Advertising 1,500 Advertising Expense 1,500 B. Advertising Expense 500 Prepaid Advertising 500 C. Advertising Expense 1,500 Prepaid Advertising 1,500 D. Prepaid Advertising 500 Advertising Expense 500

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Answers (1)

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Regan · Answer 1

B. Advertising Expense 500 Prepaid Advertising 500

Explanation:

The journal entry is shown below:

1. Prepaid Advertising A/c Dr $2,000

To Cash A/c $2,000

(Being the prepaid advertising is paid)

2. Advertisement expense A/c Dr $500

To Prepaid Advertising A/c $500

(Being the adjusting entry is recorded)

Since for three-fourth is received, so one-fourth is still pending which would be

= $2,000 - $1,500 ($2,000 * 3 : 4)

= $500