Test: CPA Financial Accounting and Reporting (FAR)

1.

Which of the following transactions would be initially recorded in the prepaid expense account?

A retail company makes significant sales of gift certificates shortly before the holiday season, the majority of which it doesn't expect will be spent until after the new year

A company pre-pays a year-long subscription to a local newspaper, the cost of which it considers small

A company pre-pays annual real estate taxes at the beginning of the fiscal year

A company orders office supplies which it expects to use within the current month

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