Question

Knowledge Check 01 Messing Company has an agreement with a third-party credit card company, which calls for cash to be received immediately upon deposit of customers' credit card sales receipts. The credit card company receives 3.5 percent of card sales as its fee. Messing has $4,000 in credit card sales on January 1. Prepare the January 1 journal entry for Messing Company by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Answer 1

Answer:

Messing Company

Journal Entry:

January 1:

Debit Cash $3,860

Debit Credit Card Expense $140

Credit Sales Revenue $4,000

To record the cash receipt and card expense for the card sales.

Explanation:

a) Data and Calculations:

Credit card commission = 3.5% of card sales

Credit card sales on January 1 = $4,000

Credit card fees = $140 ($4,000 * 3.5%) Cash received $3,860

Cash $3,860 Credit Card Expense $140 Sales Revenue $4,000