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Suppose the end of 2013 is approaching and most of the activity for the year has been entered into the accounts of Hipzone Inc. However, there are a few transactions that still need to be posted.
List the journal entries required
Suppose on December 31, Hipzone Inc. bills one of their customers $450 for a project that they had completed which had accumulated $220 of costs. The invoice has the normal terms requesting payment in 30 days. Make ALL of the entries required by this transaction.
HINT: Think of Accumulated Project Costs as an account similar to Inventory - it is an asset account used to accumulate the costs that have been incurred related to the project being completed for the customer.
THEN Hipzone Inc. needs to record depreciation on a piece of office equipment. The equipment was purchased on 1/1/2010 for $2,000, was expected to last 10 years at the time of purchase, and had an expected salvage value of $200. No depreciation has been recorded on the equipment for 2013. Make ALL of the entries required by this transaction.

Answer :

anthougo

Answer:

Hipzone Inc.

a. Journal Entries:

December 31, 2013:

Debit Accounts receivable $450

Credit Service revenue $450

To record the completion of a project for a customer, terms n/30.

Debit Cost of service $220

Credit Accumulated Project Costs $220

To record the cost of service.

b. Journal Entries:

December 31, 2013:

Debit Depreciation Expense $180

Credit Accumulated Depreciation $180

To record the depreciation expense for the year.

Explanation:

a) Data and Analysis:

December 31, 2013:

Accounts receivable $450 Service revenue $450, terms n/30.

Cost of service $220 Accumulated Project Costs $220

December 31, 2013:

Cost of equipment on 1/1/2010 = $2,000

Expected useful life = 10 years

Salvage value = $200

Depreciable amount = $1,800 ($2,000 - $200)

Annual depreciation expense = $180 ($1,800/10)

December 31, 2013:

Depreciation expense $180 Accumulated Depreciation $180

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