Examine each of the following fact scenarios, then prepare initial and end-of-year adjusting entries (when needed) assuming

(a) use of a“balance sheet” approach versus

(b) use of an “income statement” approach.

You may assume a calendar year end for each scenario. Use T-accounts to show how the same financial statement results occur under either approach. The worksheet on the website includes an illustrative solution for the first scenario.

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Scenario 1 A $1,500, one-year insurance policy was purchased on June 1, 20X1. Scenario 2 $20,000 of unearned revenue was collected on August 1, 20X1.40% of this amount was earned by the end of the year. Scenario 3 On December 1, 20X1, $3,000 was prepaid for space in a trade-show booth. The trade show is in February of 20X2. Scenario 4 A $1,000 customer deposit for future services was received on April 1, 20X1. On June 20, 20X1, the customer canceled the agreement and received a full refund.