Question

In: Accounting

Horizon Inc. sells prepaid telephone cards to customers. Horizon then pays the telecommunications company, V-Mobile, for...

Horizon Inc. sells prepaid telephone cards to customers. Horizon then pays the telecommunications company, V-Mobile, for the actual use of its telephone lines related to the prepaid telephone cards. Assume that Horizon sells $6,000 of prepaid cards in January 2020. It then pays V-Mobile based on usage, which turns out to be 60% in February and 40% in March. The total payment by Horizon for V-Mobile lines over the 2 months is $4,000.

A. Prepare the journal entries necessary for January and February

B. Compute the revenue, costs and net income Horizon will report in January, February, and March

Solutions

Expert Solution

A.

Account Titles Debit Credit
Jan Cash $                6,000
        Prepaid Cards $               6,000
Feb Prepaid Cards $                3,600
        Revenue $               3,600
Expenses $                2,400
      Cash $               2,400

B.

January February March
Revenue $                      -   $               3,600 $              2,400
Expenses $                      -   $               2,400 $              1,600
Net Income $                      -   $               1,200 $                 800

ekkarill92 answered 1 year ago
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