Sparkling Pools Received a Bill for $1,200 for Running Newspaper

question 96

Multiple Choice

Sparkling Pools received a bill for $1,200 for running newspaper ads during the last two weeks of July; the bill will be paid on August 1.Advertising expense should be:

• A)credited for $1,200 in July.
• B)credited for $1,200 in August.
• C)debited for $1,200 in July.
• D)debited for $1,200 in August.

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Definitions:

Cash Payback Method

A method in capital budgeting used to determine the duration needed for an investment to produce cash flows enough to reimburse the initial cost of the investment.

Average Rate of Return Method

A method of evaluating a project or investment by determining the average annual rate of return it will generate.

Net Present Value Method

A method of evaluating investments by calculating the present value of expected future cash flows, subtracting the initial investment.

Internal Rate of Return Method

A capital budgeting technique used to evaluate and compare the profitability of investments, calculating the interest rate at which the net present value of costs equals the net present value of benefits.