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Chapter 7: Q19E (page 417)

Journalizing credit card sales 2018

Sep. 1 Recorded National Express credit card sales for \(96,000, net of processor fee of 1%. Ignore Cost of Goods Sold.

15 Recorded ValueMax credit card sales of \)80,000. Processor charges a 1.5% fee. ValueMax charges the fee at the end of the month, therefore Marathon uses the gross method for these credit card sales. Ignore Cost of Goods Sold.

30 ValueMax collected the fees for the month of September. Assume the

September 15 transaction is the only ValueMax credit card sale. Journalize all entries required for Marathon Running Shoes.

Short Answer

Expert verified

The credit card expense is $960.

Step by step solution

01

Step-by-Step SolutionStep 1: Definition of credit card

A credit card is a particular type of card that facilities customers to buy goods on credit.

02

Journal entries for credit card sale

Date

Particulars

Debit

Credit

2018

September 1

Cash

$95,040

Credit Card Expense

$960

Sales Revenue

$96,000

(Being entry of the credit card sale)

September 15

Cash

$96,000

Sales Revenue

$96,000

(Being entry of the credit card sale)

September 30

Credit Card Expense

$960

Cash

$960

(Being entry for the payment of processing fee)

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Most popular questions from this chapter

Levon Helm was a kind of one-person mortgage broker. He would drive around Tennessee looking for homes that had second mortgages, and if the criteria were favorable, he would offer to buy the second mortgage for 鈥渃ash on the barrelhead.鈥� Helm bought low and sold high, making sizable profits. Being a small operation, he employed one person, Cindy Patterson, who did all his bookkeeping. Patterson was an old family friend, and he trusted her so implicitly that he never checked up on the ledgers or the bank reconciliations. At some point, Patterson started 鈥渂orrowing鈥� from the business and concealing her transactions by booking phony expenses. She intended to pay it back someday, but she got used to the extra cash and couldn鈥檛 stop. By the time the scam was discovered, she had drained the company of funds that it owed to many of its creditors. The company went bankrupt, Patterson did some jail time, and Helm lost everything

Requirements

  1. What was the key control weakness in this case?
  2. Many small businesses cannot afford to hire enough people for adequate separation of duties. What can they do to compensate for this?

How do businesses control cash receipts over the counter?

What are two common methods used when accepting deposits for credit card and debit card transactions?

Question: What is the difference between an internal auditor and an external auditor?

Fill in the missing information concerning how companies control cash received by mail.

a. The ________ opens the mail and sends customer checks to the treasurer.

b. The ________ deposits the customer checks in the bank.

c. The ________ uses the remittance advices to record the journal entries for cash receipts.

d. The ________ compares the bank deposit to the journal entry for cash receipts.
See all solutions

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