Since the company paid for $6000 good for one year, look for the monthly advertising payment, to do this divide the total payment by 12 months. 6000/12 = 500. So the monthly payment would be $500.
a. Cash basis accounting:
Advertising expense using cash basis would be $6000. Because the company already paid for the advertising good for 12 months.
b. Accrual basis accounting:
Advertising expense under accrual basis would be $1000.
Calculations:
$6000 Advertising prepaid on January 1 for 12 months.
Advertising expense per month is $500.
Advertising expense per month× 2 months = $1000 Advertising expense for January and February.
