Question

On March 17th, Pinny Sporting Goods accepted a credit card purchase for $900. The credit card company charges a 2% service fee. The entry to record this transaction would include a A : debit to Service Charge Expense of $18. B : credit to Service Charge Expense of $18. C : credit to Cash of $882. D : debit to Cash of $900.

Answer 1

A : debit to Service Charge Expense of $18.

Explanation:

First, one should calculate the value, in dollars of the credit card service fee

Fee = 2% x $900 = $18.

Since this fee is classified as "money coming out" of the account, the entry to a record of this transaction should include a debit to Service Charge Expense of $18.

The correct answer is alternative A.

*The whole purchase amount ($900) should be credited and the service expense should be debited, unlike alternative C, which merges both entries into one.