Question

A customer charges a treadmill at Greg’s Sport Shop using a Greg’s Sport Shop credit card. The price is $2,000 and the financing charge is 1.5% per month if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer’s account. The entry to record the finance charge on Greg’s Sport Shop’s books would: Select one: a. Credit Interest Revenue $30 b. Credit Sales $30 c. Debit Accounts Receivable $2,000 d. Debit Accounts Receivable $1.50 e. None of the above

Answer 1

Answer:

c) Credit interest revenue

Explanation:

Financing Charge = Price X Rate

Financing Charge = $2,000 X 1.5% = $30

The accounts receivable will increase by way of debit of an amount of $30.

Interest revenue will increase by way of credit of an amount of $30.