Question

Luna Company accepted credit cards in payment for $6,750 of services performed during July Year .The credit card company charged Luna a 2.75 percent service fee; it paid Luna as soon as it received the invoices Required a. Prepare the general journal entry to record the service revenue.

Answer 1

To record the service revenue for Luna Company and the credit card service fee, debit Cash for the net amount after the fee, debit Credit Card Expense for the fee calculated at 2.75% of the total sales, and credit Service Revenue for the total sales amount.

Step-by-step explanation:

The student's question pertains to accounting journal entries for service revenue when payments are made using credit cards. To record the service revenue and the associated credit card service fee, the following journal entry is made:

• Debit Cash $6,750 - (2.75% × $6,750)
• Debit Credit Card Expense $185.63 (which is 2.75% of $6,750)
• Credit Service Revenue $6,750

Calculation for the credit card expense: $6,750 × 0.0275 = $185.63 Therefore, the cash amount received from the credit card company will be $6,750 - $185.63 = $6,564.37.