I'm taking a beginning level accounting course, and we have an ongoing project as part of the course. The idea is to create a fictional service company, and take it through an accounting cycle. It's rather freeform - the nature of the company, and most of its transactions are at our discretion. One of the requirements of the part we're currently working on is the purchase of a vehicle (in order to show amortization). The amortization isn't a big deal, I just have a couple of questions about other things I want to do with this car.

1) If I finance the car with a bank loan, would accrued interest be credited directly into Bank Loan Payable, or should I create a separate account (e.g. Interest Payable)

2) I want to have the car painted up with the company logo and everything, and basically turn it into a big, moving, billboard ;). The cost of doing all that, I assume, can be considered an advertising expense. Since all that logoing will presumably be with the vehicle over the course of its time with the company, the expense of doing it shouldn't be included all at once. Would I consider this work to be prepaid advertising? It just doesn't really feel like what I would generally consider prepaid advertising to be.

Many thanks

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Originally Posted by azkar

1) If I finance the car with a bank loan, would accrued interest be credited directly into Bank Loan Payable, or should I create a separate account (e.g., Interest Payable)

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Definitely go with Interest Payable (separate account). You need to keep them separate. It makes for easier record keeping and disclosure.

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Originally Posted by azkar

2) I want to have the car painted up with the company logo and everything, and basically turn it into a big, moving, billboard ;). The cost of doing all that, I assume, can be considered an advertising expense. Since all that logoing will presumably be with the vehicle over the course of its time with the company, the expense of doing it shouldn't be included all at once. Would I consider this work to be prepaid advertising? It just doesn't really feel like what I would generally consider prepaid advertising to be.

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It would not be pre-paid advertising.

I would capitalize it. I think there is a strong case here to argue that this logo cost should be capitalized and added to the value of the car. You could argue that while this car is necessary for your business, it become useless unless it has the company’s logo attached to it.