In January, a Company Pays for Advertising Space in the Local

question 6

Multiple Choice

In January, a company pays for advertising space in the local paper for ads to be run during the months of January, February, and March at $1,500 a month. The payment would be recorded in January as a:

• A) debit of $4,500 to Cash, a credit of $1,500 to Advertising Expense, and a credit of $3,000 to Prepaid Advertising.
• B) debit of $4,500 to Accounts Payable and a credit of $4,500 to Cash.
• C) debit of $4,500 to Accounts Payable and a credit of $4,500 to Stockholders' Equity.
• D) debit of $1,500 to Advertising Expense, a debit of $3,000 to Prepaid Advertising, and a credit of $4,500 to

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Definitions:

Deferral Period

A specified period of time during which payment of a debt, investment, or loan is suspended or delayed.

Compounded Monthly

Interest calculation method where both the initial principal and the accumulated interest are recalculated every month.

Economic Values

The monetary worth of goods, services, or resources based on their utility and their capacity to satisfy wants or needs.

Wage Increase

An upward adjustment in the pay that employees receive for their work.