Exercise 9-2 Accounting for credit card sales LO C1
Levine Company uses the perpetual inventory system and allows customers to use two credit cards in charging purchases. With the Suntrust Bank Card, Levine receives an immediate credit to its account when it deposits sales receipts. Suntrust assesses a 4% service charge for credit card sales. The second credit card that Levine accepts is the Continental Card. Levine sends its accumulated receipts to Continental on a weekly basis and is paid by Continental about a week later. Continental assesses a 2.5% charge on sales for using its card.
Sold merchandise for $8,400 (that had cost $6,000) and accepted the customer’s Suntrust Bank Card. The Suntrust receipts are immediately deposited in Levine’s bank account.
Sold merchandise for $5,600 (that had cost $3,500) and accepted the customer’s Continental Card. Transferred $5,600 of credit card receipts to Continental, requesting payment.
Received Continental’s check for the April 12 billing, less the service charge.
Prepare journal entries to record the above selected credit card transactions of Levine Company.
Exercise 9-3 Direct write-off method LO P1
Dexter Company applies the direct write-off method in accounting for uncollectible accounts. March11
Dexter determines that it cannot collect $45,000 of its accounts receivable from its customer Lester Company.
Lester Company unexpectedly pays its account in full to Dexter Company. Dexter records its recovery of this bad debt.
Prepare journal entries to record the above selected transactions of Dexter.
Exercise 9-4 Percent of sales method; write-off LO P2
At year-end (December 31), Chan Company estimates its bad debts as 0.5% of its annual credit sales of $975,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $580 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off.
Prepare the journal entries of Chan to record these transactions and events of December 31, February 1, and June 5.