Question

MacKenzie Company sold $640 of merchandise to a customer who used a Regional Bank credit card. Regional Bank deducts a 2.0% service charge for sales on its credit cards and credits MacKenzie's account immediately when sales are made.The journal entry to record this sale transaction would be:A)Debit Cash of $640 and credit Sales $640.B)Debit Cash of $640 and credit Accounts Receivable $640.C)Debit Accounts Receivable $640 and credit Sales $640.D)Debit Cash $627.20; debit Credit Card Expense $12.80 and credit Sales $640.E)Debit Cash $627.20 and credit Sales $627.20.

Answer 1

.D)Debit Cash $627.20; debit Credit Card Expense $12.80 and credit Sales $640

Step-by-step explanation:

Sales = $640

To recognize this,

Debit Cash $640

Credit Sales $640

Being entries to recognize sale and cash received.

On this sale, the bank deducts 2% of the sales value

Amount deducted = 2% × $640

= $12.80

To recognize this,

Debit Credit Card Expense $12.80

Credit Cash $12.80

Being entries to recognize credit card expense incurred on sale.

As such, the net effect of the two entries

Debit Cash $627.20

Debit Credit Card Expense $12.80

Credit Sales $640

The right option is D)Debit Cash $627.20; debit Credit Card Expense $12.80 and credit Sales $640.