Question

If a merchandiser accepts valid customer VISA cards as payment for legitimate merchandise sales, the merchandiser will typically have some bad debt expense arising from such sales transactions.

A.True
B.False

Answer 1

The statement is True. When a merchandiser accepts valid customer VISA cards as payment for legitimate merchandise sales, there is a possibility of bad debt expense arising from such sales transactions.

Step-by-step explanation:

The statement is True. When a merchandiser accepts valid customer VISA cards as payment for legitimate merchandise sales, there is a possibility of bad debt expense arising from such sales transactions. This is because there is always a risk that the customer may default on their credit card payment, resulting in the merchandiser not receiving full payment for the merchandise sold.

Bad debt expense is an expense that a company incurs when it is unable to collect payment from its customers. It represents a loss for the company and is recorded as an expense on the income statement. In the case of credit card sales, the credit card company transfers the money to the seller immediately, but the buyer owes the money to the credit card company at the end of the month. If the buyer fails to make the payment, the seller may have to write off the debt as bad debt.

It's important for merchandisers to carefully manage their credit card sales and monitor customer payments to minimize the risk of bad debt expense.