question archive 1)A company allows its customers to use bank credit cards to charge purchases
1)A company allows its customers to use bank credit cards to charge purchases
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1)A company allows its customers to use bank credit cards to charge purchases. When customers use the credit cards, the net amount is deposited in the company's checking account. The company also is charged a 2.5% service charge for these credit card sales. Assume that on April 13, the company sold $25,000 worth of merchandise to customers who used credit cards. Prepare the company's journal entry to record the credit card sales for April 13 assuming the company deposited the receipts that same day. ?
2- Crystal Products allows customers to use bank credit cards to charge purchases. The bank used by Crystal Products processes all bank credit cards in exchange for a 3% processing fee. All credit card receipts deposited are credited to the company account on the day of deposit. Assume that on January 18, Crystal Products sold and deposited $19,000 worth of bank credit card receipts. Prepare the general journal entry to record this transaction. ?
3- Describe how accounts receivable arise and how they are accounted for, including the use of a subsidiary ledger and an allowance account. ?
.4- Define a note receivable and explain how interest is calculated on a short-term note receivable. ?
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Answer:
1. journal entry to record the credit card sales for April 13
| particulars | debit | credit |
| Cash | $24375 | |
| Credit card expenses ($25000*0.025=$625) | $625 | |
| Sales | $25000 | |
| (Being credit card sales recorded) |
2. Journal in the books of crystal Products
| particulars | debit | credit |
| Cash | 18430 | |
| Credit card expenses ($19000.03) | 570 | |
| Sales | 19000 | |
| (BEing sales recorded) |
3. Accounts receivable
Arise - Accounts receivable arise when credit sales is done o cunstomers.
Accounting - While recording Accounts receivable uncollectable amount will be deducted and this will be recoded at net realisable value.
Subsidiary ledger - While recording in subsidiary books Accounts receivable are recorded separately on individual basis.For every customer separate recording is made.
4. Note receivable
Definition - in note receivable is a note under which a promise is made to pay some fixed amunt to another person at future date.That is why it is also called 'Promisory Note'.
Calculation of amount of interest on short term note receivable - short term note receivable are those which will expire inless than one year.
Interest = Principal amount on note * annual interest rate * Time of the note (in years)
