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7 July, 17:52

Prepare journal entries for the following credit card sales transactions (the company uses the perpetual inventory system).

1. Sold $29,000 of merchandise, which cost $22,200, on Mastercard credit cards. Mastercard charges a 5% fee.

2. Sold $5,900 of merchandise, which cost $3,450, on an assortment of bank credit cards. These cards charge a 4% fee.

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  1. 7 July, 18:27
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    Cash 27,550 debit

    credit card fee 1,450 debit

    A/R 29,000 credit

    --to record sales for Mastercard--

    COGS 22,200 debit

    Inventory 22,200 credit

    --to record cost of good sold for the previous sale--

    Cash 5,664 debit

    credit card fee 236 debit

    A/R 5,900 credit

    --to record sales for Mastercard--

    COGS 3,450 debit

    Inventory 3,450 credit

    --to record cost of good sold for the previous sale--

    Explanation:

    The credit card charges a fee and provides cash for the firm. It removes the effort to collect from the customer.

    master card fee and net proceeds:

    29,000 x 5% = 1,450

    net: 29,000 - 1,450 = 27,550

    bank credit card fee and net proceeds:

    5,900 x 4% = 236

    net 5,900 - 236 = 5,664
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