Chapter 10, Problem 4MC

### College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

Chapter
Section

### College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

# When credit sales are $325 plus sales tax of 5%, and there is a bank credit card fee of 3%, what is the debit to Bank Credit Card Expense? (a)$16.25 (b) $10.24 (c)$341.25 (d) $331.01 To determine Find the correct option, the option that indicates the correct amount of debit to Bank Credit Card Expense. Explanation Sale: Sale is an exchange transaction of merchandise wherein the seller transfers the ownership of asset or goods to buyer, for money. Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically. Debit and credit rules: • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholdersâ€™ equity accounts. • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholdersâ€™ equity accounts. Prepare journal entry to record the sale transaction through bank credit card.  Date Account Titles and Explanation Post Ref. Debit ($) Credit ($) Cash 331.01 Bank Credit Card Expense 10.24 Sales 325.00 Sales Tax Payable 16.25 (Record credit card sale) Table (1) Description: • Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited. • Bank Credit Card Expense is an expense account. Since expenses and losses decrease equity, equity value is decreased, and a decrease in equity is debited. • Sales is a revenue account. Since revenues and gains increase equity, equity value is increased, and an increase in equity is credited. • Sales Tax Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited. Working Note 1: Compute sales tax payable amount. SalesÂ taxÂ payableÂ =Â SalesÃ—SalesÂ taxÂ percentage=Â$325Ã—5%=Â \$16

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