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On July 1 of the current calendar year. Olive Co paid 7700 cash for management services to be performed over a two year period beginning July 1. Olive 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 Olive would include

Answer :

Answer:                                              d                  c

Prepaid expenses                         7.700  

    Cash                                                             7.700

   

Managment services expense      1.925  

   Prepaid expenses                                        1.925

Explanation:

Paid 1-jul              7700

 

Two Years       7.700 24 months

Monthly                  321               month

Current Year       1.925           6 months

.

You must record the expense of the current year which is six months. (1.925)  

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