Question

Levine Company uses the perpetual inventory system and allows customers to use two credit cards in charging purchases. With the Suntrust Bank Card, a 4% service charge for credit card sales is assessed. The second credit card that Levine accepts is the Continental Card. Continental assesses a 2.5% charge on sales for using its card. Prepare journal entries to record the following selected credit card transactions of Levine company.
Apr. 8 Sold merchandise for $6,000 (that had cost $4,434) and accepted the customer's Suntrust Bank Card.
12 Sold merchandise for $7,200 (that had cost $4,666) and accepted the customer's Continental Card.
20 Received Continental's check for the April 12 billing, less the service charge.

Answer 1

Answer:

Journal Entries

Apr 08 Debit Bank $5,760 Debit Service charges $240 Credit Revenue $6,000

         Debit Cost of goods sold $4,434 Credit Inventory $4,434

Apr 12 Debit Accounts Receivable $7,020 Debit Service charges $180 Credit Revenue $7,200

           Debit Cost of goods sold $4,666  Credit Inventory $4,666

Apr 20 Debit Bank $7,020 Credit Accounts Receivable $7,020

Explanation:

Judging by the last transaction, The business first requires deposits from Continental card's bank hence the receiving of check at a later stage.

Answer 2

Answer:

April 8

Dr Cash............. 5,760

Dr Credit card expense....... 240

Cr Sales............................................... 6,000

Dr costs of goods sold........... 4,434

Cr merchandise inventory........................4,434

April 12

Dr Cash................... .........................7,020

Dr Credit card expense..............180

Cr Sales.............................................7,200

Dr costs of goods sold....................4,666

Cr merchandise inventory.................4,666

C. April 20

Dr Cash 7,020

Cr Account receivable 7,020

Explanation:

A April 8

Dr Cash............. 5,760(6,000 X 0.96= 8,064)

Dr Credit card expense....... 240(6,000 X 0.04=336)

Cr Sales............................................... 6,000

Dr costs of goods sold........... 4,434

Cr merchandise inventory........................4,434

B. April 12

Dr Cash................... .........................7,020 (7,200 X .096= 5,460)

Dr Credit card expense..............180 (7,200 X 0.025= 180)

Cr Sales.............................................7,200

Dr costs of goods sold....................4,666

Cr merchandise inventory.................4,666

C. April 20

Dr Cash 7,020

Cr Account receivable 7,020