Question

A customer makes a $1,500 purchase at ApplianceWorld, paying with a credit card. ApplianceWorld is charged a 2% fee by the credit card company. When recording this sale, ApplianceWorld would____________.

Answer 1

Answer:

Debit Cash $1,470

Debit  Expense - Credit card fee $30

Credit  Sales revenue - $1,500

Explanation:

The sales revenue for Appliance world will be $1,500 as this is the gross sale made at point of sale.

• Since, this sale is made via credit card, the credit card fee will be deducted from the sales revenue,
• Difference will be cash received after deducting the credit card fee from sales revenue.

The fee charged by credit card company is the expense for ApplianceWorld:

The fee would be charged at the purchase made by the customer i.e. $1,500×2% = $30

The cash that would be recovered to ApplianceWolrd will be $1,500 - $30 =  $1,470 (net of the credit card fee).

Journal entry

Debit (increase) Cash $1,470

Debit (increase) Expense - Credit card fee $30

Credit (increase) sales revenue - $1,500