Question

You are the controller reviewing production costs for the year.One amount in the production reports continues to bother you –advertising expenses. During the year, the company had institutedan expensive advertising campaign to sell some of its slower movingproducts. It is still too early to tell if the advertising campaignwas successful. There had been much internal debate over how toreport advertising cost. You believe that this cost should bereported as an expense of the current period. The Vice President ofFinance feels it should be reported as Prepaid Ad-vertising andreported as a current asset. The President argues that these costsshould be identified as part of manufacturing overhead and reportedas inventory cost until sold. The President noted that the companyis experiencing financial difficulty and expensing this amount inthe current period might jeopardize a planned bond offering. Also,reporting the advertising cost as inventory rather than prepaidadvertising, would result in less attention by the financialcommunity. What would you do?