Question

MacKenzie Company sold $640 of merchandise to a customer who used a Regional Bank credit card. Regional Bank deducts a 2.0% service charge for sales on its credit cards and credits MacKenzie's account immediately when sales are made.The journal entry to record this sale transaction would be:A)Debit Cash of $640 and credit Sales $640.B)Debit Cash of $640 and credit Accounts Receivable $640.C)Debit Accounts Receivable $640 and credit Sales $640.D)Debit Cash $627.20; debit Credit Card Expense $12.80 and credit Sales $640.E)Debit Cash $627.20 and credit Sales $627.20.

Answer 1

Answer:

.D)Debit Cash $627.20; debit Credit Card Expense $12.80 and credit Sales $640

Explanation:

Sales = $640

To recognize this,

Debit Cash              $640

Credit Sales            $640

Being entries to recognize sale and cash received.

On this sale, the bank deducts 2% of the sales value

Amount deducted = 2% × $640

                              = $12.80

To recognize this,

Debit  Credit Card Expense $12.80

Credit Cash                            $12.80

Being entries to recognize credit card expense incurred on sale.

As such, the net effect of the two entries

Debit  Cash                                  $627.20

Debit   Credit Card Expense       $12.80  

Credit Sales                                  $640

The right option is D)Debit Cash $627.20; debit Credit Card Expense $12.80 and credit Sales $640.