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.

Question

Business

Ashton Montoya

11 May, 15:50

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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Luca · Answer 1

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