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 sales receipts. Suntrust assesses a 4% service charge for credit card sales. The second credit card that Levin accepts is Continental Card. Levin sends its accumulated receipts to Continental on a weekly basis and is paid by Continental a week later. Continental assesses a 2.5% charge on sales for using it card. Prepare journal entries to record the following credit card transactions of Levin Company. Apr 8. Sold merchandise for $8,400 (that cost $6,000) and accepted the customers Suntrust Bank Card. The Sunset receipts are immediately deposited in Levin's bank account. Apr 12. Sold merchandise for $5,600 (that cost $3,500) and accepted the customer's Continental Card. Transferred $5,600 of credit card receipts to Continental requesting payment. Apr 20. Received Continental's check for the April 12 billing, less the service fee.

Answer 1

Solution:

Date	General Journal	Debit	Credit
Apr.   8	Bank	$        8,064.00
	Card Fee - Suntrust Bank Card	$            336.00
	Sales Revenue		$      8,400.00
	(Sold merchandise on credit card)
Apr.   8	Cost of Goods Sold	$        6,000.00
	Inventory		$      6,000.00
	(Cost of merchandise sold)
Apr.   12	Account Receivables	$        5,600.00
	Sales Revenue		$      5,600.00
	(Sold merchandise on Continental credit card)
Apr.   12	Cost of Goods Sold	$        3,500.00
	Inventory		$      3,500.00
	(Cost of merchandise sold)
Apr.   20	Bank	$        5,460.00
	Card Fee Expense- Continental Card	$            140.00
	Account Receivables		$      5,600.00
	(Received check , less the service fee)

Note:

1) On Apr 8. receipts are immediately deposited in levine bank account. so bank account is debited.

2) Continental credit card receipts will be received week later. so account receivables is debited.