On April 1, Santa Fe, Inc

question 8

Multiple Choice

On April 1, Santa Fe, Inc. paid Griffith Publishing Company $1,548 for 36-month subscriptions to several different magazines. Santa Fe debited the prepayment to a Prepaid Subscriptions account, and the subscriptions started immediately.
-What adjusting entry should be made by Santa Fe, Inc. for the adjustment on December 31 of the first year assuming the company is using a calendar-year reporting period and no previous adjustments had been made?

• A) Debit Subscription Expense $516 and credit Prepaid Subscriptions $516.
• B) Debit Unearned Subscriptions $387 and credit Subscription Expense $387.
• C) Debit Subscription Expense $387 and credit Cash $387.
• D) Debit Prepaid Subscriptions $516 and credit Subscription Expense $516.
• E) Debit Subscription Expense $387 and credit Prepaid Subscriptions $387.

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Definitions:

Dividend Paid

Cash or stock distributed by a company to its shareholders from its profits or reserves as a return on investment.

Unrealised Profits

Profits that have been recorded on the books through an accounting entry but have not actually been realized through the receipt of cash or other assets.

AASB 128

The Australian Accounting Standards Board’s standard on Investments in Associates and Joint Ventures, outlining the accounting for interests in joint ventures and associates.

Identification Requirements

The criteria or documents required to establish the identity of an individual or entity in legal or financial transactions.