Question

Good Stuff Retailers accepted $60,000 of Wells Fargo Visa credit card charges for merchandise sold on July 1. Wells Fargo charges 4% for its credit card use. What should Good Stuff Retailers debit as a result of this transaction?

1) Cash for $57,600 and Service Charge Expense for $2,400
2) Accounts Receivable for $57,600 and Service Charge Expense for $2,400
3) Cash for $60,000
4) Accounts Receivable for $60,000

Answer 1

Good Stuff Retailers should debit Cash for $57,600 and Service Charge Expense for $2,400.

Step-by-step explanation:

In this transaction, Good Stuff Retailers should debit Cash for $57,600 and Service Charge Expense for $2,400.

The total credit card charges accepted by Good Stuff Retailers is $60,000. However, Wells Fargo charges a 4% service fee for credit card use. So, 4% of $60,000 is $2,400.

Therefore, the correct option is 1) Cash for $57,600 and Service Charge Expense for $2,400.