Question

Tech-In-Fo Ltd has been invoiced by its advertising supplier for $460 000 worth of advertising supplied during the year ending 30 June 2020.
As at 30 June 2019, Tech-In-Fo Ltd had an advertising payable balance of $25 000. During the year ending 30 June 2020, Tech-In-Fo Ltd paid $448 000 to its advertising supplier.
Tech-In-Fo Ltd believes the current advertising campaign will generate a great deal of additional business by exposing the company to a wider range of potential clients.
Identify the balance of each of the following items for Tech-In-Fo Ltd for the financial year ending 30 June 2020. Show workings where necessary. If you believe there is no balance, provide a justification using the recognition criteria for the elements of the financial statements.
1. Advertising asset

2. Advertising payable

3. Advertising expense

Answer 1

Lets understand it in a deeper way.

There is an opening balance of $25000 that Tech-In-Fo Ltd needs to pay. So, $ 25000 is payable.

During the quarter ended June 2020, there is an additional invoice raised for $ 460000 by its supplier.

Total payable= $25000+$460000 = $485000

Out of which, Tech-In-Fo Ltd has made a payment of $448000, therefore, the advertising expenses payable amounts to $ 485000 - $448000 =$ 37000.

The company is of the opinion that this expense of current period will fetch good business for the company.

So, in this case, advertising expense = $460000

advertising asset = $460000

advertising payable = $37000.