On December 31,the balance in the Prepaid Advertising account was $176,000,which is the remaining balance of a 12-month advertising campaign purchased on August 31 in the current year.Assuming the cost is spread equally over each month,how much did this advertising campaign cost in total?

Question

Quizplus · Accepted Answer

The advertising campaign was purchased on August 31 and the balance on December 31 was $176,000, which means that 4 months of advertising have already been used up (September, October, November, December). Therefore, there are 8 months remaining. If the cost is spread equally over each month, the monthly cost would be $176,000/4 = $44,000. So the total cost of the 12-month advertising campaign would be $44,000 x 12 = $528,000. However, since we are only interested in the cost up to December 31, we need to subtract the amount that has already been used up: $44,000 x 4 = $176,000. Therefore, the total cost of the advertising campaign is $528,000 - $176,000 = $352,000. This is closest to answer choice C, $264,000.

On December 31,the Balance in the Prepaid Advertising Account Was