Ott Company acquired rights to a patent from Grey under a licensing agreement that required an advance royalty payment when the agreement was signed. Ott remits royalties earned and due under the agreement on October 31 each year. Additionally, on the same date, Ott pays, in advance, estimated royalties for the next year. Ott adjusts prepaid royalties at year-end. Information for the year ended December 31, year 2, is as follows: Date Amount January 1, year 2 Prepaid royalties $ 65,000 October 31, year 2 Royalty payment (charged to royalty expense) 120,000 In its December 31, year 2 balance sheet, Ott should report prepaid royalties of Question 3 options: $65,000. $100,000. $85,000. $55,000