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Nat2105 [25]
3 years ago
5

Item 2 On July 1 of the current calendar year, Plum Co. paid $8,000 cash for management services to be performed over a two-year

period beginning July 1. 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:
Business
1 answer:
arlik [135]3 years ago
7 0

Answer:

- July 1st -  December 31st (6 months)

- Here, $8,000 is paid for 2 years (24 months)

So, expenses for 6 month = $8,000 * 6/24 = $2,000

Date  Journal Entry                   Debit    Credit

          Expense                         $2,000

                 Prepaid expense                   $2,000

          (To record the expense)

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