Question

Brief Exercise 184 Twain Company has the following accounts in its general ledger at July 31: Accounts Receivable $40,000 and Allowance for Doubtful Accounts $2,500. During August, the following transactions occurred. Oct. 15 Sold $16,000 of accounts receivable to Nelson Factors, Inc. who assesses a 4% finance charge. 25 Made sales of $900 on VISA credit cards. The credit card service charge is 3%. Journalize the transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

a. Cash Dr, $15,360 ($16,000 - ($16,000 × 4%))

   Service charges expenses Dr, $640 ($16,000 × 4%)

                     To Accounts receivables $16,000

(Being sale of accounts receivable is recorded)

To record the sale of accounts receivable we simply debited the cash and service charge expenses as it increased the assets and expenses and we credited the accounts receivables as it reduced the assets  

b. Cash Dr, $873 ($900 - ($900 × 3%))

   Service charge expenses Dr, $27 ($900 × 3%)

                     To Sales revenue $900

(Being Cash received and service charge expenses is recorded)

To record the cash received and service charge expenses we simply debited the cash and service charge expenses as  it increased the assets and expenses  and we credited the sales revenue as it also increased the revenue