Question

The Jack Frost Law Firm prepays for advertising in the local newspaper. On January​ 1, the law firm paid $ 11 comma 000 for ten months of advertising. How much advertising expense should Jack Frost Law Firm record for the two months ending February 28 under the

a. cash​ basis
b. accrual basis

Answer 1

a. $11,000

b. $2,200

Step-by-step explanation:

According to the cash basis accounting, the cash is recorded when actual cash is received

But as per the accrual basis of accounting, the revenue is recorded when it is realized or earned whether cash is received or not

So,

a. Cash basis = $11,000

b. Accrual basis

= $11,000 ÷ 10 months × 2 months

= $2,200