Understanding Acme Company's Credit Card Sales Process

Acme Company Credit Card Sales and Cash Receipts

Acme Company has an agreement with a major credit card company where cash is received immediately upon deposit of Acme customers' credit card sales receipts. The credit card company charges a fee of 3.5% of the card sales. If Acme Company has $2,000 in credit card sales, which of the following statements is true?

Which of the following statements is true?

a. Acme debits Cash $2,000

b. Acme debits Cash $1,930

c. Acme debits Accounts Receivable - Credit Card Co $2,000

d. Acme debits Accounts Receivable - Credit Card Co $1,930

e. Acme credits Sales $1,930

Answer:

b. Acme debits Cash $1,930

Explanation:

Before passing the journal entry, first we have to do the calculations which is shown below

= Credit card sales - Credit card sales × fee percentage

= $2,000 - $2,000 × 3.5%

= $2,000 - $70

= $1,930

The journal entries are shown below:

Cash A/c Dr $1,930

          To Sales A/c $1,930

(Being cash is received after applying the fee percentage)

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