Question

On March 3, Kitselman Appliances sells $781,500 of its receivables to Ervay Factors Inc. Ervay Factors assesses a finance charge of 1% of the amount of receivables sold. Prepare the entry on Kitselman Appliances’ books to record the sale of the receivables.

(b) On May 10, Fillmore Company sold merchandise for $4,600 and accepted the customer’s America Bank MasterCard. America Bank charges a 4% service charge for credit card sales. Prepare the entry on Fillmore Company’s books to record the sale of merchandise

Answer 1

The Journal entries are as follows:

(a) On March 3,

Cash A/c Dr. $773,685

Service Charge Expense (1% × $781,500) A/c Dr. $7,815

To Account Receivable $781,500

(To record the sale of the receivables.)

(b) On May 10,

Cash A/c Dr. $4,416

Service Charge Expense (4% × $4,600) A/c Dr. $184

To Sales Revenue $4,600

(To record the sale of the merchandise)