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Chapter 7: Q6SE (page 413)

Recording credit card and debit card sales

Restaurants do a large volume of business with credit and debit cards. Suppose Summer,

Sand, and Castles Resort restaurant had these transactions on January 28, 2018:

National Express credit card sales $ 10,800

ValueCard debit card sales 10,000

Requirements

1. Suppose Summer, Sand, and Castles Resort’s processor charges a 2% fee anddeposits sales net of the fee. Journalize these sales transactions for the restaurant.

2. Suppose Summer, Sand, and Castles Resort’s processor charges a 2% fee anddeposits sales using the gross method. Journalize these sales transactions for therestaurant.

Short Answer

Expert verified

Bank account debited with $20,384.

Step by step solution

01

Definition of credit card

A credit card is a card that allows users to purchase goods on credit.

02

Using the net method

The net method is a method to record the revenue of the credit card sale in which total sale less prescribing fees equals cash.

Date

Particulars

Debit

Credit

1.

Bank

$20,384

Credit Card Expense

$416

Sales

$20,800

(To record credit card sales)

03

Using the gross method

The gross method is a method in which total sale is directly deposited within a few days. The amount to prescribed fees is deducted at the end of the month.

Date

Particulars

Debit

Credit

2.

Bank

$20,800

Sales

$20,800

(To record the credit card sales)

Credit Card Expenses

$416

Bank

$416

(Payment of credit card expenses)

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Most popular questions from this chapter

Journalizing credit card sales 2018

Sep. 1 Recorded National Express credit card sales for \(96,000, net of processor fee of 1%. Ignore Cost of Goods Sold.

15 Recorded ValueMax credit card sales of \)80,000. Processor charges a 1.5% fee. ValueMax charges the fee at the end of the month, therefore Marathon uses the gross method for these credit card sales. Ignore Cost of Goods Sold.

30 ValueMax collected the fees for the month of September. Assume the

September 15 transaction is the only ValueMax credit card sale. Journalize all entries required for Marathon Running Shoes.

Understanding internal control, components, procedures, and laws

Match the following terms with their definitions.

1. Internal control

2. Control procedures

3. Firewalls

4. Encryption

5. Environment

6. Information system

7. Separation of duties

8. Collusion

9. Documents

10. Audits

11. Operational efficiency

12. Risk assessment

13. Sarbanes-Oxley Act

a. Two or more people working together to overcome internal controls.

b. Part of internal control that ensures resources are not wasted.

c. Requires companies to review internal control and take responsibility for the accuracy and completeness of their financial reports.

d. Should be prenumbered to prevent theft and inefficiency.

e. Limits access to a local network.

f. Example: The person who opens the bank statement should not also be the person who is reconciling cash.

g. Identification of uncertainties that may arise due to a company’s products, services, or operations.

h. Examination of a company’s financial statements and accounting system by a trained accounting professional.

i. Without a sufficient one of these, information cannot properly be gathered and summarized.

j. The organizational plan and all the related measures that safeguard assets, encourage employees to follow company policies, promote operational efficiency, and ensure accurate and reliable accounting data.

k. Component of internal control that helps ensure business goals are achieved.

l. Rearranges data by a mathematical process.

m. To establish an effective one, a company’s CEO and top managers must behave honorably to set a good example for employees.

Phoenix Restaurants accepts credit and debit cards as forms of payment. Assume Phoenix had $12,000 of credit and debit card

sales on June 30, 2017.

9. Suppose Phoenix’s processor charges a 2% fee and deposits sales net of the fee. Journalize the sale transaction for the

restaurant.

10. Suppose Phoenix’s processor charges a 2% fee and deposits sales using the gross method. Journalize the sale transaction for

the restaurant.

Evaluating internal control over cash payments Gary’s Great Cars purchases high-performance auto parts from a Nebraska vendor. Dave Simon, the accountant for Gary’s, verifies receipt of merchandise and then prepares, signs, and mails the check to the vendor.

Requirements

1. Identify the internal control weakness over cash payments.

2. What could the business do to correct the weakness?

Why is it necessary to record journal entries after the bank reconciliation has been prepared? Which side of the bank reconciliation requires journal entries?
See all solutions

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