Question

Levine Company uses the perpetual inventory system and allows customers to use two credit cards in charging purchases. With the Suntrust Bank Card, Levine receives an immediate credit to its account when it deposits salesreceipts. Suntrust assesses a 4% service charge for credit card sales. The credit card that Levine accepts is the Continental Card. Levine sends its accumulated receipts to Continental on a weekly basis and is paid by Continental about a week later. Continental assesse a 2.5% charge on sales for using its card. Prepare journal entries to record the following selected credit card transactions of Levine Company.a.Sold merchandise for $8, 400 (that had cost $6,000) and accepted the customer's Suntrust Bank Card. The Suntrust receipts are immediately deposited in Levine's bank account. b.Sold merchandise for $5, 600 (that had cost $3, 500) and accepted the customer's Continental Card. Transferred $5, 600 of credit card receipts to Continental, requesting payment. c.Received Continental's check for the April 12 billing, less the service charge.

Answer 1

Levine Company

Journal Entries

Date Description DR CR

a. Bank 8,064

Service Charge 336

Sales 8,400

Being the sales of goods

Cost of Goods sold 6,000

Merchandising Inventory 6,000

Being the cost of goods sold

b. Account Receivable(Continental) 5,600

Sales 5,600

Being the sales of goods

Cost of Goods sold 3,500

Merchandising Inventory 3500

Being the cost of goods sold

April 12 Cash 5,460

Service Charge 140

Account Receivable 5,600

Being the amount received from Continental

Step-by-step explanation: