Question 23. Question :
On June 30, 2011, 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, 2011 for Apricot would
include:
A debit to an expense for $1,250
A debit to a prepaid expense for $1,250
A credit to an expense for $3,750
A debit to a prepaid expense for $3,750
A credit to a liability for $1,250
Question 24. Question :
On January 1 a company
purchased a five-year insurance policy for $1,800 with coverage
starting immediately. If the purchase was recorded in the
Prepaid Insurance account and the company records adjustments
only at year-end, the adjusting entry at the end of the first year
is:
Debit Prepaid Insurance, $1,800; credit
Cash, $1,800
Debit Prepaid Insurance, $1,440; credit
Insurance Expense, $1,440