Question

Prepare journal entries for the following credit card sales transactions (the company uses the perpetual inventory system). Sold $28,000 of merchandise, which cost $21,400, on Mastercard credit cards. Mastercard charges a 5% fee. Sold $5,800 of merchandise, which cost $3,400, on an assortment of bank credit cards. These cards charge a 4% fee.

1. Sold $28,000 of merchandise on Mastercard credit cards. Mastercard charges a 5% fee.

2. Record the cost of the sale, $21,400.

3. Sold $5,800 of merchandise on an assortment of bank credit cards. These cards charge a 4% fee.

4. Record the cost of the sale, $3,400.

Answer 1

ANSWER:

Under Perpetual Inventory System - Inventory quantity updated "Perpetually" on an ongoing basis, usually Real Time.

Journal Entries-

Transaction 1 - Sale of Merchandise on Mastercard Credit Cards.

Recording Sales

Debit- Bank A/C $ 26,600 ($ 28,000 × 95% After Considering Credit Card Charges)

Debit- Credit Card Charges A/C $ 1,400 ($ 28,000 × 5% Credit Card Charges)

Credit- Sales A/C $ 28,000.

(Recording $ 28,000 Sales on Mastercard Credit Cards with 5% Credit Card Charges.)

Recording Inventory Outward

Debit- Cost of Goods Sold A/C $ 21,400 (Provided)

Credit- Inventory A/C $ 21,400 (Provided)

(Recording Cost of Goods Sold as Part of Perpetual Inventory System.)

Transaction 2 - Sale of Merchandise on assortment of Bank Credit Cards.

Recording Sales

Debit - Bank A/C $ 5,568 ($ 5,800 × 96% After Considering Credit Card Charges)

Debit - Credit Card Charges A/C $ 232 ($ 5,800 × 4% Credit Card Charges)

Credit - Sales A/C $ 5,800

(Recording $ 5,800 Sales on Assortment of Bank Credit Cards with 4% Credit Card Charges.)

Recording Inventory Outward

Debit - Cost of Goods Sold A/C $ 3,400 (Provided)

Credit - Inventory A/C $ 3,400 (Provided)

(Recording Cost of Goods Sold as Part of Perpetual Inventory System.)