1. On April 1 , Santa Fe, Incorporated paid Griffith Publishing Company \( \$ 1,620 \) 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, 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?

After making the payment of \( \$ 1,620 \) for the 36-month subscriptions, Santa Fe would initially record this entire amount in the Prepaid Subscriptions account. Since the subscriptions are for 36 months, the monthly expense would be \( \$ 1,620 / 36 = \$ 45 \). By December 31, nine months of subscriptions have expired (from April to December). Thus, the total amount to be recognized as an expense would be \( 9 \times \$ 45 = \$ 405 \). After adjusting, the amount in the Prepaid Subscription account would be \( \$ 1,620 - \$ 405 = \$ 1,215 \). To recap, the Prepaid Subscription account after adjustments on December 31 will show a balance of \( \$ 1,215 \). This balance reflects the amount Santa Fe has prepaid for future subscriptions beyond the nine months already consumed. Now, they can plan ahead for even more literary adventures!