In January,a company pays for advertising space in the local paper for ads to be run during the months of January,February,and March at $1,500 a month.The journal entry to record the payment would debit:
A)Cash for $4,500,credit Advertising Expense for $1,500,and credit Prepaid Advertising for $3,000.
B)Accounts Payable and credit Cash for $4,500.
C)Accounts Payable and credit Stockholders' Equity for $4,500.
D)Advertising Expense for $1,500,debit Prepaid Advertising for $3,000,and credit Cash for $4,500.

Question

Quizplus · Accepted Answer

When a company pays for something that provides benefits future periods,the cost is reported as an asset.The prepayment is reported as an asset when purchased.The journal entry includes a debit to Advertising Expense for $1,500 (the $1,500 paid for January),a debit to Prepaid Advertising for $3,000 (the amount paid in advance for February and March at $1,500 per month),and a credit to Cash for $4,500 (the total amount paid).

In January,a Company Pays for Advertising Space in the Local