Question

The Orange Lily Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $2,880 for six months of advertising. Orange Lily Law Firm recorded $2,880 in the Prepaid Advertising account.
Required:
If Orange Lily Law Firm had recorded their expenses using the other method, how much advertising expense would they have recorded for the two months ending February 28?

Answer 1

Answer:

$2880;$960

Explanation:

Calculation to determine how much advertising expense would they have recorded for the two months ending February 28

UNDER THE CASH BASIS, the Law Firm will record ​$2,880 of advertising expense for the two months ending February 28

UNDER THE ACCRUAL BASIS, the Law Firm will record ​$960 of advertising expense for the two months ending February 28.l Calculated as:

Advertising expense=$2,880/6*2

Advertising expense=$960