On April 1,Santa Fe,Inc.paid Griffith Publishing Company $1,548 for 36-month subscriptions to several different magazines.Santa Fe debited the prepayment to a Prepaid Subscriptions account,and the subscriptions started immediately.What amount should appear in the Prepaid Subscription account for Santa Fe,Inc.after adjustments on December 31 of the first year assuming the company is using a calendar reporting period and no previous adjustment has been made?

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Quizplus · Accepted Answer

By December 31, 9 months have passed since April 1. The monthly expense is $1,548 / 36 = $43. After 9 months, the expense is 9 * $43 = $387. The remaining prepaid amount is $1,548 - $387 = $1,161.