Question

On April 1, Santa Fe, Inc. paid Griffith Publishing Company $3,348 for a 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-year reporting period and no previous adjustment has been made

Answer 1

$2,511 should appear in the Prepaid Subscription account for Santa Fe, Inc. after adjustments on December 31.

Step-by-step explanation:

Prepayment is the payment in advance against an expense which is not accrued yet. The prepayment is an asset because you didn't get your product of service and payment made in advance the action is pending on cash receiving party.

Total Prepaid subscription = $3,348

Number of months = 36 months

Number of Months spend until December 31 = 9 months

Prepaid Expense adjusted = $3,348 x 9/36 = $837

Prepaid subscription after adjustment = $3,348 - $837 = $2,511