Question

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

Answer 1

Answer:

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.