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Credit Card Sales The Tin Roof accepts cash, personal checks, and two credit cards when customers buy merchandise. With the Great American Bank Card, The Tin Roof receives an immediate deposit in its checking account when credit card sales slips are deposited at the bank. The bank charges a 4% fee. With the United Merchants Card, The Tin Roof mails the credit card sales slips to United Merchants’ regional processing center each day. United Merchants accumulates these slips for three days and then mails a check to The Tin Roof, after deducting a 3% fee. Prepare journal entries to record the following:
| a. | Sales for March 15 were as follows: | |
| Cash and checks | $1,000 | |
| Great American Bank Card (Deposited at the end of the day) | 1,200 | |
| United Merchants Card (Mailed at the end of the day) | 800 | |
| $3,000 | ||
| b. | Received a check from United Merchants on March 20 for: | $5,078 |
a.
| General Journal | |||
|---|---|---|---|
| Date | Description | Debit | Credit |
| Mar.15 | Cash | $AnswerIncorrect 0.00 points out of 1.00 |
$AnswerCorrect 1.00 points out of 1.00 |
| Accounts Receivable – United Merchants | AnswerIncorrect 0.00 points out of 1.00 |
AnswerCorrect 1.00 points out of 1.00 |
|
| AnswerCashAccounts Receivable – United MerchantsCredit Card Fee ExpenseSales RevenueCorrect 1.00 points out of 1.00 |
AnswerIncorrect 0.00 points out of 1.00 |
AnswerCorrect 1.00 points out of 1.00 |
|
| AnswerCashAccounts Receivable – United MerchantsCredit Card Fee ExpenseSales RevenueCorrect 1.00 points out of 1.00 |
AnswerCorrect 1.00 points out of 1.00 |
AnswerIncorrect 0.00 points out of 1.00 |
|
| To record cash and credit card sales. | |||
b.
| General Journal | |||
|---|---|---|---|
| Date | Description | Debit | Credit |
| Mar.20 | AnswerCashAccounts Receivable – United MerchantsCredit Card Fee ExpenseSales RevenueCorrect 1.00 points out of 1.00 |
$AnswerIncorrect 0.00 points out of 1.00 |
$AnswerCorrect 1.00 points out of 1.00 |
| AnswerCashAccounts Receivable – United MerchantsCredit Card Fee ExpenseSales RevenueCorrect 1.00 points out of 1.00 |
AnswerCorrect 1.00 points out of 1.00 |
AnswerCorrect 1.00 points out of 1.00 |
|
| To record receipt of check from United Merchants. | |||
Expert Answer
Solution
A.
Great American Bank card sales will be treated as cash sales only credit card expenses will be excluded from cash received. Other United card transaction will be treated as credit transaction and recorded as account receivable less expenses.
Credit card expense on Great American Bank card(1200×4%)=$48
United merchant credit card expense (800×3%)=$24
| Date | Account titles | Debit | Credit |
| March 15 | Cash(1000+1200-48) | $2,152 | |
| Account receivable- United merchant(800-24) | $776 | ||
| Credit card fee expense (48+24) | $72 | ||
| Sales revenue | $3,000 | ||
| (To record cash and credit card sales) |
B.
| Mar 20 | Cash | $776 | |
| Account receivable-United merchant | $776 | ||
| (To record receipt of check from united merchant) |
