Please answer. On June 30, 2014, Apricot Co. paid $5,000 cash for management ser

Question

Please answer. On June 30, 2014, Apricot Co. paid $5,000 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, 2014, for Apricot would include:

A debit to Management Services Expense for $1,250. A debit to Prepaid Management Services Expense for $1,250. A credit to Management Services Expense for $3,750. A debit to Prepaid Management Services Expense for $3,750. A credit to Management Services Payable for $1,250.

Explanation / Answer

A debit to Management Services Expense for $1,250.

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