Question

A customer purchased merchand be from ABC Compary for $4,500. They used a bank credit card to pay for the merctuandine 1he bank charges ABC a service fee of 2.5% for crefit card sales. What does the entry to record the sale inchude?

A. a debit to Cash $4,500
B. a debit to Credit Card Expense $112.50
C. a credit to Sales $4.387.50
D. a credit to Cash $4,387.50

Answer 1

The correct entry to record a sale of $4,500 made with a credit card, which incurs a 2.5% service fee, includes a debit to Cash for $4,387.50, a debit to Credit Card Expense for $112.50, and a credit to Sales for the full $4,500 amount.

Step-by-step explanation:

When a customer purchases merchandise using a credit card, the service fee charged by the bank must be accounted for in the company's books. Given that the service fee is 2.5% of the $4,500 sales amount, we calculate the fee as $112.50. The entry to record the sale would include a debit to Cash for the net amount received ($4,500 - $112.50 = $4,387.50) and a debit to Credit Card Expense for the amount of the fee ($112.50). Additionally, there would be a credit to Sales for the full sales amount ($4,500), which represents the revenue earned from the transaction.

The correct journal entry to record this sale would be:

• Debit Cash $4,387.50
• Debit Credit Card Expense $112.50
• Credit Sales $4,500

Note that there will not be any direct credit to Cash for $4,387.50, as the actual cash received is recorded, not the sales amount minus the service fee.

The correct option is A. a debit to Cash $4,500