Answer:
c. A debit to a prepaid expense for $7,500.
Explanation:
Because the pament for management services are in-advance, is a right for Apricot, as now has the right to receive this management services for two-years
The entry will do the following:
it will recognize the prepaid expense
prepaid management services
and will post the cashoutflow for the amount paid.
prepaid management services 7,500 debit
cash 7,500 credit
From the option we are given:
a.- FALSE there is no expense in the entry
b.- FALSE there is no expense in the entry
d.- FALSE the prepaid expense is debited, not credited
e.- FALSE. cash is credit, not debit.
c.- CORRECT there is a prepaid expense, which is being debited.
