On July 1 Of The Current Calendar Year, Olive Company Paid $7,500 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 Assets Accounts At The Time Of Cash Payment. The Adjusting Entry On December 31 Of The Current Year For Olive Would Include:
Initially, On July 1 of the current calendar year, when the Olive Company paid cash for management services, it is recorded as a Prepaid Expense (Management Fee Paid In Advance) and as an asset as it is the company’s policy to do so. The journal entry to management fee paid in advance is shown below: Prepaid Expense a/c / Management Fee Paid In Advance a/c $7,500 Cash a/c $7,500 (Expense Paid In Advance For Two Year Management Services) Calculation Of E...