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On April 1, Otisco, Inc. paid Garcia Publishing Company $2,088 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, 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

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Answer:

$1,566

Explanation:

The computation of the amount that should be appear after the Dec 31 adjustment is shown below:

But before that monthly amount paid would be determined

= $2,088 ÷ 36 months

= $58

Now the remaining months is

= 36 months - 9 months

= 27 months

So, the amount that could appear is

= $58 × 27 months

= $1,566

hence, the amount should be $1,566

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