A company has $500 in Prepaid Advertising before any adjustments.At the end of the year,an adjusting entry is made to debit Advertising Expense for $100.The ending balance in the Prepaid Advertising account will be:

Question

Quizplus · Accepted Answer

The adjusting entry of debiting Advertising Expense for $100 means that $100 worth of prepaid advertising has been used up/expired during the year. Therefore, the ending balance in the Prepaid Advertising account will be reduced by $100 to reflect the amount that has been used up, leaving a remaining balance of $400 ($500 original balance - $100 adjustment). Therefore, choice (C) is correct.

A Company Has $500 in Prepaid Advertising Before Any Adjustments