Question

A retailer that makes credit card sales:

Select one:

Absorbs any losses on uncollectible credit card accounts

Records such sales as a credit to Cash or Accounts Receivable, a debit to Credit Card Fees Expense, and a credit to Sales Revenue

Is charged a fee ranging from 1% to 5% of the amount of each credit card sale

On which financial statement and at what amount are accounts receivable reported?

Select one:

Income statement at the amount written off

Balance sheet at the amount owed by customers

Balance sheet at the net realizable value

Income statement at the net uncollectible amount

Answer 1

A) Answer = Records such sales as a credit to Cash or Accounts Receivable, a debit to Credit Card Fees Expense, and a credit to Sales Revenue and it is also

Charged a fee ranging from 1% to 5% of the amount of each credit card sale

Explanation:

The credit card fee usually ranges from one percent to five percent of the amount of the credit card purchase. The journal entry to record a $1,000 credit card sale, with a three percent credit card fees, is as follow:

Cash (or account receivable). 970

Credit card fee expenses . 30

To sales revenue . 1000

B) balance sheet at net realizable value

Explanation = Account receivable are recorded in the balance sheet at the end of the year at net realizable value i.e. after deducting the allowance for bad debt from account receivables.