On June 30 Apricot Co. paid $7,500 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. On June 30 Apricot should record:

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According to the policy of Apricot, all prepaid expenses are recorded as an asset at the time of cash payment. Therefore, on June 30, Apricot should record a debit to a prepaid expense (an asset account) for $7,500.