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22 November, 02:47

Evergreen Company accepted credit card payments in exchange for $50,000 of services provided to customers. The credit card company charges a 3% service charge. Prepare the journal entry to record this transaction

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  1. 22 November, 04:31
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    Debit Cash/Bank $48,500

    Debit Service charge (p/l) $48,500

    Credit Accounts receivable $50,000

    Being entries to account for credit card payment of debt due from customers.

    Explanation:

    The credit card payment is a form of cash and cash equivalent that may be accepted by a company in place of debt owed by another company (a customer).

    This is usually at a fee and may be done to ease the company's liquidity. The actual receivable will then be collected from the customer by the credit card company. This is a form of debt factoring.

    Service charge

    = 3% * $50,000

    = $1,500

    Amount received = $50,000 - $1,500

    = $48,500

    The accounts to be adjusted include cash/bank account, service charge (p/l) and accounts receivable.
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