Undercover Inc sells a range of security devices and markets its products through advertisments on popular websites and online newsfeeds. Each advertising contract requires the company to pay in advance for 12 months of exposure, the level of which is relatively constant throughout the period of the contract. Undercovers balance sheet at 31 December 2018 showed pre-paid marketing costs of 5m. During 2019 it paid 4m for a new annual advertising contract commencing on 1 July 2019 and a further 4m for a second contract that commenced 1 January 2020. Undercovers income statement for 2019 and balance sheet at 31 December 2019 will show the following:

Select one:

7m of advertising expense and 6m of pre-paid marketing costs

5m of advertising expense and 6m of pre-paid marketing costs

8m of advertising expense and 4m of pre-paid marketing costs

13m of advertising expense and nil of pre-paid marketing costs