Asked by Veronica Vaselin on Jun 26, 2024
Verified
What amount should appear in the Prepaid Subscription account for Otisco,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?
A) $1,548.
B) $387.
C) $516.
D) $1,161.
E) $0.
Prepaid Subscriptions
Payments made in advance for subscription-based services, recognized as an asset until the service period has been fulfilled.
Calendar-Year
A one-year period that begins on January 1 and ends on December 31, used as the financial year by many countries and organizations.
Adjustment
A modification made to accounts or financial statements to correct them or to reflect changes in economic circumstances.
- Assess and clarify adjustments related to prepaid expenses.
Verified Answer
SK
Shreyas KumbharJun 28, 2024
Final Answer :
D
Explanation :
The total cost of the subscriptions is $1,548 for 36 months. By December 31 of the first year, 9 months have passed. The monthly cost is $1,548 / 36 = $43. Therefore, the cost for 9 months is $43 * 9 = $387. The remaining balance for the Prepaid Subscription account is the initial amount minus the cost for 9 months: $1,548 - $387 = $1,161.
Learning Objectives
- Assess and clarify adjustments related to prepaid expenses.