Question

Mayfair Co. allows select customers to make purchases on credit. Its other customers can use either of two credit cards: Zisa or Access. Zisa deducts a 3% service charge for sales on its credit card. Access deducts a 2% service charge for sales on its card. Mayfair completes the following transactions in June.

June		4		Sold $650 of merchandise on credit (that had cost $400) to Natara Morris terms n/30.
		5		Sold $6,900 of merchandise (that had cost $4,200) to customers who used their Zisa cards.
		6		Sold $5,850 of merchandise (that had cost $3,800) to customers who used their Access cards.
		8		Sold $4,350 of merchandise (that had cost $2,900) to customers who used their Access cards.
		13		Wrote off the account of Abigail McKee against the Allowance for Doubtful Accounts. The $429 balance in McKee’s account stemmed from a credit sale in October of last year.
		18		Received Morris’s check in full payment for the purchase of June 4.

Required:
Prepare journal entries to record the preceding transactions and events. (The company uses the perpetual inventory system.) (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Solution:

Date	Particulars	Debit ($)	Credit ($)
Jun 4	Accounts receivable (Customer N)	$650
	Sales		$650
	(To record the credit sales)
Jun 4	Cost of Goods Sold	$400
	Merchandise Inventory		$400
	(To record the cost of merchandise sold )
Jun 5	Cash	$6,693
	Credit card expense (W.N)	$207
	Sales		$6,900
	(To record the sales)
Jun 5	Cost of Goods Sold	$4,200
	Merchandise Inventory		$4,200
	(To record the cost of merchandise sale)
Jun 6	Accounts receivable	$5,733
	Credit card expense (W.N)	$117
	Sales		$5,850
	(To record the sales)
Jun 6	Cost of Goods Sold	$3,800
	Merchandise Inventory		$3,800
	(To record the cost of merchandise sale)
Jun 8	Accounts receivable	$4,263
	Credit card expense	$87
	Sales		$4,350
	(To record the sales)
Jun 8	Cost of goods sold	$2,900
	Merchandise Inventory		$2,900
	(To record the cost of merchandise sale)
Jun 13	Allowance for doubtful accounts	$429
	Accounts receivable (Customer A)		$429
	(To write off an uncollectable amount)
Jun 17	Cash ($5,733+$4,263)	$9,996
	Accounts receivable		$9,996
	(To record the cash received)
Jun 9	Cash	$637
	Discount (W.N)	$13
	Accounts receivable (Customer N)		$650
	(Sold accounts receivable for cash, less 4%)

Working Notes
Jun 5 Credit card expense = Sales*3%
=6,900*3%
=$207
Jun 6 Credit card expense = Sales*2%
=5,850*2%
=$117
Jun 8 Credit card expense = Sales*2%
=4,350*2%
=$87
Jun 9 Discount = Accounts receivable*2%
=650*2%
=$13