Answer the following assuming a balance date of 30 June 2016

By passing above mentioned entry on dated Jan 01, 2016, the payment against Advertisement expenses has been recorded as an asset. Further, applying the accrual principle of accounting, the cost incurred on Jan 01, 2016 for six months is amortized equally during next six months, hence, the entry for an amount of $700 is passed at the end of each month whereby the amortized portion of advertisement expense is reduced from asset and transferred to expenses under Profit & Loss Account.

As a result, after passing the adjuting entry on June 30, 2016, the balance under Prepaid advertiment is knocked-off and the expense of $4,200 is booked under Advertisement expenses.