On June 30 of the Current Calendar Year, Apricot Co

Multiple Choice

On June 30 of the current calendar year, Apricot Co. paid $7,500 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31 for Apricot would include:

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