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 500Sales for 500 and Credit Card Expense for 475 and to Credit Card Expense for $25
Solution
The entry to record this sales transaction would include debits to: Cash for 25.
Here's the step by step explanation:
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The company sold merchandise worth $500 on a bank credit card. The bank charges a 5% fee for this service.
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To calculate the fee, multiply the total sales by the fee percentage (500 * 0.05 = $25).
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The company will receive the sales amount minus the bank fee, which is 475).
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Therefore, the company will debit (increase) its Cash account by $475, the amount it actually receives.
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The company will also debit (increase) its Credit Card Expense account by $25, the fee it pays to the bank.
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The credit (increase) will be to the Sales account for $500, the total sales amount.
So, the correct answer is "Cash for 25".
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