Laramie, Inc. signed a contract with a service provider for security services at a rate of $310 per month for the period of January through June. Laramie, Inc. will pay the service provider the entire amount at the end of June. Laramie, Inc. makes adjusting entries each month. During the month of June, it should record total security expense of $620.

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Quizplus · Accepted Answer

The total security expense for June should not be $620. Since the contract is for $310 per month from January through June, the total for 6 months would be $310 x 6 = $1,860. The monthly adjusting entry should reflect the monthly expense of $310, not the cumulative amount unless it's the final entry covering all unpaid months.