During the current accounting period, Montana Ridge 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 yet to be received.
The proper adjusting entry is:

Question

Quizplus · Accepted Answer

Transfer 1/4 x $2,000 = $500 from Prepaid Advertising to Advertising Expense

During the Current Accounting Period, Montana Ridge Company Paid $2,000