On January 1,Team Shirts paid $600 for three months' worth of advertising beginning on February 1.What should the balance be in the Prepaid advertising account on April 1?

Question

Quizplus · Accepted Answer

Since Team Shirts paid for three months of advertising beginning on February 1, the total amount paid was $600/3 = $200 per month. By April 1, two months of advertising would have elapsed, meaning that only two months' worth of advertising would still be prepaid. Therefore, the balance in the Prepaid advertising account on April 1 should be 2 x $200 = $400. Since the question is asking for the balance in the Prepaid advertising account, and not the total cost of advertising or the amount that has been expensed, the correct answer is C) $200.

On January 1,Team Shirts Paid $600 for Three Months' Worth