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Alpha Company sells goods to customers who use Worldwide Express nonbank credit cards. Credit card sales on July 15, 2016 amounted to $25,000 and were subject to a 5.5% credit card company collection fee. Alpha Company collected payment from Worldwide Express on July 21. What amounts should be recorded for the following accounts for the July 21 collection?A) CashB) SalesC) Service ChargeD) Accounts Receivable

Respuesta :

Answer:

(A) $23,625

(B) $0

(C) $1,375

(D) $25,000

Explanation:

Given that,

Credit card sales on July 15, 2016 = $25,000

Credit card company collection fee = 5.5%

Therefore, the amounts should be recorded as follows:

(i) Cash amounted should be recorded as:

= Credit card sales × (1 - collection fee)

= $25,000 × (1 - 0.055)

= $25,000 × 0.945

= $23,625

(ii) Sales = $0

(iii) Service Charge:

= Credit card sales × collection fee

= $25,000 × 5.5%

= $1,375

(iv) Accounts Receivable:

= $25,000

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