Write a one page memo regarding the following case.
1. Starbuck's advertising campaign
On September 1st, 2014 Starbucks prepays (with cash) for a $4.5 million advertisement campaign to be conducted by a large advertisement agency. The advertisements are scheduled to run during September, October and November of 2014.
The year-ended September 30, 2014 looks to be a very profitable year for Starbucks but the projections for the next fiscal year (beginning October 1, 2014 and ending on September 30, 2015) do not look as good. Management would like to expense the entire cost of the advertising campaign in the year-ended September 30, 2014.
If management were to expense the campaign in the current fiscal year, what effect would it have on the financial statements for the year-ended September 30, 2014 and the year-ended September 30, 2015? Write a memo to management discussing how the transaction should be handled and why. Be sure to discuss the relevant accounting principles that apply to this transaction.
Your memo should be no longer than one page, size 12 font, 1.15 spacing (the default spacing for Microsoft Word). Make sure to use the memo format given on the next page of the exam.