New River Computer Company began manufacturing personal computers for small businesses in the beginning of 2011. During the year, New River purchased 30,000 mouse pads with the company name and logo at a cost of $2.50 each. The marketing manager used 2,500 of the pads as an advertising gimmick at a local trade show, and 25,000 of the pads were packaged with computers that manufactured during 2011. Eighty percent of the computers were sold in 2011

Required

A Determine the cost of the mouse pads that would be included in the following accounts as of December 31, 2011:

• Raw materials
• Finished goods
• Cost of goods sold
• Advertising expense

B. On which basic financial statement do the accounts in question A appear? Why does it matter on which basic financial statement the amounts associated with purchasing the computer mouse pads appear?