Assume a company that normally expenses advertising costs was to capitalize and amortize these costs over 3 years instead. After the third year net income would:

Question

Quizplus · Accepted Answer

Capitalizing and amortizing advertising costs spreads the expense over multiple years. If advertising costs are increasing, the amortized expense in the third year would be lower than the expense if costs were expensed immediately, resulting in higher net income.

Assume a Company That Normally Expenses Advertising Costs Was to Capitalize