Alpha Company sells goods to customers who use Worldwide Express nonbank credit cards. Credit...

Question:

Alpha Company sells goods to customers who use Worldwide Express nonbank credit cards. Credit card sales on July 15, 2016, amounted to $25,000 and were subject to a 4.5% credit card company collection fee. Alpha Company collected payment from Worldwide Express on July 21.

What amounts should be recorded for the following accounts for the July 21 collection?

What Is A Credit Card Sale:

It is common for companies to accepts Credit Cards in order to provide more flexibility to customers and thus increase their sales. When a Credit Card sale occurs, the money is received from the Credit Card company which usually charges a processing fee.

Answer and Explanation:

On July 21, the following accounts should be impacted as the journal entry below illustrates:

Account Dr Cr
Cash =25,000 -1,125 23,875
Credit card processing expense =25,000 *0.045 1,125
Accounts receivable 25,000

Learn more about this topic:

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Receivables Management: Definition & Purpose

from Accounting 101: Financial Accounting

Chapter 7 / Lesson 4
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