Answer:
a) cash basis - $8,400
b) accrual basis - $2,400
Explanation:
a) cash basis - this is a method of recording transactions only when cash is received or paid.
As at 28 February, the cash prepaid was $8,400. Therefore it is the value on cash basis.
b) accrual basis - this is the method of recording transactions when earned or incurred. As at 28 February, only two months have been incurred for advertising. As such,
=($8,400/ 7 months)× 2 months
= $2,400
