The pink peonies law firm prepays for advertising in the local newspaper. on january 1, the law firm paid $ 6 comma 000 for twelve months of advertising. how much advertising expense should pink peonies law firm record for the two months ending february 28 under the

a. cash basis?

b. accrual basis?

Since the company paid for $6000 good for one year, look for the monthly advertising payment, to do this divide the total payment by 12 months. 6000/12 = 500. So the monthly payment would be $500.

a. Cash basis accounting:

Advertising expense using cash basis would be $6000. Because the company already paid for the advertising good for 12 months.

b. Accrual basis accounting:

Advertising expense under accrual basis would be $1000.

Calculations:

$6000 Advertising prepaid on January 1 for 12 months.

Advertising expense per month is $500.

Advertising expense per month * 2 months = $1000 Advertising expense for January and February.