Question

On March 4, Micro Sales makes $4,850 in sales on bank credit cards that charge a 2.5% service charge and deposits the funds into Micro Sales' bank accounts at the end of the business day. Journalize the sales and recognition of expense as a single journal entry.

Answer 1

Micro Sales should debit Cash for $4,728.75 and Service Charge Expense for $121.25, and credit Sales for $4,850 in the journal entry to account for credit card sales and the service charge.

Step-by-step explanation:

Journalizing Credit Card Sales and Service Charge

When Micro Sales makes $4,850 in sales on bank credit cards that charge a 2.5% service charge, the company needs to record both the sales revenue and the service charge expense in their journal. This can be done in a single journal entry that debits (increases) Cash, debits (increases) the Service Charge Expense, and credits (increases) Sales Revenue.

The calculation for the cash received is $4,850 less the 2.5% service charge. Solving this:

2.5% of $4,850 (service charge) = $4,850 * 0.025 = $121.25

Cash received (net amount) = Gross Sales - Service Charge = $4,850 - $121.25 = $4,728.75

The journal entry would be:

• Debit Cash $4,728.75
• Debit Service Charge Expense $121.25
• Credit Sales $4,850

This entry recognizes the net cash that Micro Sales will receive after the service charge and records the service charge as an expense, alongside the revenue earned from the credit card sales.

Answer 2

Please see the journal entry below

Step-by-step explanation:

Dr Cash. $4,728

($4,850 - $121.25)

Dr Credit card expense. $121.25

(2.5% × $4,850)

Cr Sales $4,850

We can infer from the question that sales can be debited to cash since the deposit is at the end of the business day.