The following occurred for a company during the last two months of its fiscal year ended May 31, 2014:
Apr. 1 Paid $7,200 for future consulting services.
1 Paid $1,920 for insurance through March 31 of the following year.
30 Received $7,500 for future services to be provided to a customer.
May 1 Paid $1,200 for future newspaper advertising.
23 Received $9,200 for future services to be provided to a customer.
31 Of the consulting services paid for on April 1, $5,000 worth had been received.
31 Part of the insurance paid for on April 1 had expired.
31 Services worth $7,200 had not yet been provided to the customer who paid on April 30.
31 Of the advertising paid for on May 1, $340 worth had not been published yet.
31 The company had performed $9,000 of the services that the customer had paid for on May 23.
Required
1. Prepare entries for April and May under the approach that records prepaid expenses and unearned revenues in balance sheet accounts. Also, prepare adjusting entries at the end of the year.
2. Prepare entries for April and May under the approach that records prepaid expenses and unearned revenues in income statement accounts. Also, prepare adjusting entries at the end of the year.
Analysis Component: Explain why the alternative sets of entries in requirements 1 and 2 do not result in different financial statement amounts.