The jack frost law firm prepays for advertising in the local newspaper. on january 1, the law firm paid $8,400 for seven 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? a. under the cash basis, jack frost law firm will record 8,400 of advertising expense for the two months ending february 28. b. under the accrual basis, jack frost law firm will record of advertising expense for the two months ending february 28

a. $8,400

b. $2,400

Explanation:

The computation is shown below:

a. Cash basis: Under the cash basis, the amount which is already paid is recorded as the cash basis

In the given case, the $8,400 will be recorded as an advertising expense

b. Accrual basis: Under the accrual basis, when the amount earned but not received i.e means it is billed.

Since $8,400 is paid for 7 months, but from January 1 to February 28 it has 2 months so for two months, it would be

= $8,400 × 2 months ÷ 7 months

= $2,400

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