Question

The following selected transactions relate to METU Company.

Mar. 1 Sold $30,000 of merchandise to Salem Company, terms 5/10, n/30.

Mar.11 Received payment in full from Salem Company for balance due on existing accounts receivable.

Mar.12 Accepted JIM Company’s $30,000, 6-month, 13% note for balance due.

Mar.13 Made METU Company credit card sales for $15,200.

Mar.15 Made Visa credit card sales totaling $7,400. A 2% service fee is charged by Visa.

Apr.11 Sold accounts receivable of $8,000 to Hashim Company. Hashim Company assesses a service charge of 2.5% of the amount of receivables sold.

Mar.13 Received collections of $9,500 on METU Company credit card sales and added finance charges of 2.01% to the remaining balances.

Instructions: Prepare the journal entries for the transactions. (Ignore entries for cost of goods sold.)

Answer 1

Journal Entries to be recorded in the Books of METU Company

Date	Particulars	Debit ($)	Credit ($)
March 1	Accounts Receivable(Salem Company) A/c Dr	$30,000
	To Sales Revenue A/c		$30,000
	(Sales on account recorded)
March 11	Cash/Bank A/c        Dr	$28,500
	Sales Discount A/c Dr ($30,000*5%= $1,500)	$1,500
	To Account Receivable (Salem) A/c		$30,000
	(Being collection of accounts receivable recorded)
March 12	Notes Receivable A/c   Dr	$30,000
	To Accounts Receivable A/c- JIM		$30,000
	(To record acceptance of JIM- Company Note for balance due)
March 13	Accounts Receivable A/c   Dr	$15,200
	To Sales Revenue A/c		$15,200
	(recorded company own credit card sales)
March 15	Cash/Bank A/c          Dr ($7,400*98%)	$7,252
	Service Charge Expense A/c   Dr ($7,400*2%)	$148
	To Sales Revenue A/c		$7,400
	(Record credit card sales of visa)
April 11	Cash/Bank A/c      Dr ($8,000*97.50%)	$7,800
	Service Charge Expense A/c   Dr ($8,000*2.50%)	$200
	To Accounts Receivable (Hashim Company) A/c		$8,000
	(Recorded Sales of receivables to factor i.e. Hashim Company)
April 13	Cash/ Bank A/c    Dr	$9,500
	To Accounts Receivable A/c		$9,500
	(Recorded collections of account receivable)
	Accounts Receivable A/c    Dr ($15,200-$9,500)*2.01% =$5,700*2.01%= $114.57	$115 (Rounded Off)
	To Interest Revenue A/c		$115
	(Record interest on amount due)