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T. Hillcrest Co. sold $500 of merchandise on a bank credit card with a 5% fee. The entry to record this sales transaction would include debit(s) to:Multiple choice question.Accounts Receivable for $500Sales for $500Cash for $500 and Credit Card Expense for $25Cash for $475 and to Credit Card Expense for $25

Question

T. Hillcrest Co. sold 500ofmerchandiseonabankcreditcardwitha5500 of merchandise on a bank credit card with a 5% fee. The entry to record this sales transaction would include debit(s) to:Multiple choice question.Accounts Receivable for 500Sales for 500Cashfor500Cash for 500 and Credit Card Expense for 25Cashfor25Cash for 475 and to Credit Card Expense for $25

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Solution

The entry to record this sales transaction would include debits to: Cash for 475andtoCreditCardExpensefor475 and to Credit Card Expense for 25.

Here's the step by step explanation:

  1. The company sold merchandise worth $500 on a bank credit card. The bank charges a 5% fee for this service.

  2. To calculate the fee, multiply the total sales by the fee percentage (500 * 0.05 = $25).

  3. The company will receive the sales amount minus the bank fee, which is 475(50025=475 (500 - 25 = 475).

  4. Therefore, the company will debit (increase) its Cash account by $475, the amount it actually receives.

  5. The company will also debit (increase) its Credit Card Expense account by $25, the fee it pays to the bank.

  6. The credit (increase) will be to the Sales account for $500, the total sales amount.

So, the correct answer is "Cash for 475andtoCreditCardExpensefor475 and to Credit Card Expense for 25".

This problem has been solved

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