Question

On April 1, Otisco, Incorporated paid Garcia Publishing Company $3,060 for 36-month subscriptions to several different magazines. Otisco debited the prepayment to a Prepaid Subscriptions account, and the subscriptions started immediately. What amount should appear in the Prepaid Subscription account for Otisco, Incorporated after adjustments on December 31 of the first year assuming the company is using a calendar-year reporting period and no previous adjustment has been made

Answer 1

Answer:

The amount that should appear in the Prepaid Subscription account for Otisco, Incorporated after adjustments on December 31 of the first year is $2,295.

Explanation:

From the question, we are given the following:

Amount of 36-month subscriptions = $3,060

Therefore. we have:

Monthly subscription = Amount of 36-month subscriptions / 36 months = $3,060 / 36 = $85

Number of months from April 1 to December 31 = 9 months

First year subscription = Monthly subscription * Number of months from April 1 to December 31 = $85 * 9 = $765

Balance in the Prepaid Subscription on December 31 = Amount of 36-month subscriptions - First year subscription = $3,060 - $765 = $2,295

Therefore, the amount that should appear in the Prepaid Subscription account for Otisco, Incorporated after adjustments on December 31 of the first year is $2,295.