Garcia Company had the following selected transactions during the year. (A partial chart of accounts follows:
Cash; Accounts Receivable; Prepaid Insurance; Wages Payable; Unearned Revenue; Revenue; Wages Expense; Insurance Expense; Depreciation Expense.)
Jan. 1 The Company paid $6,000 cash for 12 months of insurance coverage beginning immediately for the calendar year.
Aug. 1 The Company received $2,400 cash in advance for 6 months of contracted services beginning on August 1 and ending on January 31.
Dec. 31 The Company prepared any necessary year-end adjusting entries related to insurance coverage and services rendered.
a. Record journal entries for these transactions assuming Garcia follows the usual practice of recording a prepayment of an expense in an asset account and recording a prepayment of revenue received in a liability account.
b. Record journal entries for these transactions assuming Garcia follows the alternative practice of recording a prepayment of an expense in an expense account and recording a prepayment of revenue received in a revenue account.