Abe & Anna Split Ice Cream Parlor paid $3,000 cash for a 6-month advertising contract on September 30, 2019. The amount of advertising expense reported on the Income Statement for the year ending December 31, 2019, for this advertising contract is

Question

Quizplus · Accepted Answer

The advertising contract covers 6 months, from September 30, 2019, to March 30, 2020. For the year ending December 31, 2019, only 3 months of the contract period fall within this year (October, November, December). Therefore, the expense reported should be for 3 months. The monthly cost is $3,000 / 6 = $500. For 3 months, this amounts to $500 * 3 = $1,500.

Abe & Anna Split Ice Cream Parlor Paid $3,000 Cash