Question

Exercise 7.5 Recording sales made with bank credit cards and American Express, with 8 percent sales tax. LO 7-1 Record the following transactions of Lisa’s Fashion Boutique in a general journal. Lisa's Fashion Boutique operates in a state with 8% sales tax. (Round your intermediate calculations and final answers to 2 decimal places): DATE TRANSACTIONS 2019 Feb. 2 Sold merchandise for cash totaling $3,700 to customers using bank credit cards. Record the 14 percent discount on credit card sales at time of sale. 15 Sold merchandise totaling $3,100 to customers using American Express. 20 Received amount due from American Express, less their 15 percent discount, for sales made by customers using American Express on February 15.

Answer 1

The Journal entries are as follows:

(i) On 2019 Feb. 2,

Cash A/c Dr. $3,436.56

Credit card expense A/c Dr. $559.44

To sales $3,700

To sales tax payable $296

(To record entry for sales and discount on credit card sales)

(ii) On 2019 Feb. 15,

Accounts receivable A/c[$3,100 + ($3,100×8%)] Dr. $3,348

To sales $3,100

To sales tax payable($3,100×8%) $248

(To record sales made using american express)

(iii) On 2019 Feb. 20,

Credit card expense A/c ($3,348×15%) Dr. $502.2

Cash A/c ($3,348 - $502.2) Dr. $2,845.8

To Accounts receivable A/c $3,348

(To record receivable for sold merchandise and credit card expense)

Workings:

Cash to be received from Feb 2 sale:

= [Sales + sales tax payable] - credit card expense

= [$3,700 + ($3,700 × 8%)] - [$3,700 + ($3,700 × 8%)] × 14%

= $3,996 - $559.44

= $3,436.56