​Roberts, Inc., a​ retailer, accepts payment through credit cards. During​ July, credit card sales amounted to $ 110000. The processor charges a 4​% fee. What is the correct journal entry or entries for credit card sales assuming the gross​ method?

Answer 1

To record credit card sales using the gross method, you will recognize the total sales revenue and then record the related credit card fee as an expense when it is incurred. Here’s how the journal entries would look:

1. Record the Credit Card Sales:

   Date: July XX
   Accounts Receivable (Credit Card Sales)       110,000
       Sales Revenue                                    110,000
   

2. Record the Credit Card Processor Fee: The processor charges a 4% fee on the sales amount, which can be calculated as follows: \[ Fee = 110,000 \times 0.04 = 4,400 \] So, the entry to record the fee would be:

   Date: July XX
   Credit Card Expense (or Bank Charges)         4,400
       Accounts Receivable (Credit Card Sales)       4,400
   

In summary, the journal entries will show the total sales and then recognize the fee separately as an expense.

Answer 2

Question content area bottom
Part 1
A.
Accounts Receivable
110 comma 000
Sales Revenue
110 comma 000
Credit Card Expense
4 comma 400
Cash
4 comma 400
B.
Cash
110 comma 000
Sales Revenue
110 comma 000
Credit Card Expense
4 comma 400
Cash
4 comma 400
C.
Cash
105 comma 600
Credit Card Expense
4 comma 400
        Sales Revenue
110 comma 000
D.
Accounts Receivable
105 comma 600
Credit Card Expense
4 comma 400
        Sales Revenue
110 comma 000

Answer 3

To determine the correct journal entry option for credit card sales using the gross method, let’s clarify the steps once more.

1. The gross amount of credit card sales is recognized as Sales Revenue.
2. The Credit Card Expense (or processing fee) should be recorded based on the percentage charged by the processor.
3. The net amount that will actually be received in cash will be the total sales minus the credit card fees.

Given your information:

• Total credit card sales: $110,000
• Processor fee: 4% of $110,000 = $4,400
• Cash received (Net): $110,000 - $4,400 = $105,600

Now let's review the options:

A.

Accounts Receivable        110,000
    Sales Revenue                    110,000
Credit Card Expense         4,400
    Cash                                 4,400

This is incorrect because it incorrectly credits cash instead of accounts receivable.

B.

Cash                           110,000
    Sales Revenue                    110,000
Credit Card Expense         4,400
    Cash                                  4,400

This is incorrect because it shows cash received first and doesn't account for the fees correctly.

C.

Cash                           105,600
Credit Card Expense         4,400
    Sales Revenue                   110,000

This option is incorrect because the cash amount is presented incorrectly. The journal entry should not combine cash and expenses in one line.

D.

Accounts Receivable        105,600
Credit Card Expense         4,400
    Sales Revenue                   110,000

This is incorrect because it doesn't follow the gross method properly, as it misrepresents the accounts receivable.

Correct Approach:

If we were to create a complete correct journal entry using the gross method based on the provided options, it should be structured like this:

1. Record sales revenue:

   • Accounts Receivable 110,000
   • Sales Revenue 110,000

2. Then, account for the fees:

   • Credit Card Expense 4,400
   • Cash (or Accounts Receivable) 105,600

However, the total cash received net after fees and the accounting of those fees should typically follow closely to either the total sales or the total of accounts receivable separately for clarity.

Since none of the options logically represent the journal entry as per the gross method correctly, I would propose that the correct interpretation should be:

• Correct Total Sale Entry:

  • Accounts Receivable (or Cash) 110,000
  • Sales Revenue 110,000

• Fee Adjustment:

  • Credit Card Expense 4,400
  • Accounts Receivable 4,400 (or similar close entries to balance)

You would need to make modifications to options A, B, C, or D to find an accurate set of entries. The preferred practices of accounting involve keeping clear distinctions between sales revenue and fees incurred.

If I had to choose the closest to correctness from given options, C is the only one that recognizes cash after fees, but it doesn’t correctly define the journal entries as per accounting standards. More clarity would be required if these entries were to be recognized properly.