On July 1of the Current Calendar Year,Plum Co

Multiple Choice

On July 1of the current calendar year,Plum Co.paid $7,500 cash for management services to be performed over a two-year period.Plum follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment.The adjusting entry on December 31 of the current year for Plum would include:

A) A debit to an expense and a credit to a prepaid expense for $5,625.
B) A debit to a prepaid expense and a credit to Cash for $5,625.
C) A debit to an expense and a credit to a prepaid expense for $1,875.
D) A debit to a prepaid expense and a credit to an expense for $1,875.
E) A credit to a liability and a debit to a prepaid expense for $1,875.