Levine Company uses the perpetual inventory system and allows customers to use two credit cards in charging purchases. With the Suntrust Bank Card, a 4% service charge for credit card sales is assessed. The second credit card that Levine accepts is the Continental Card. Continental assesses a 2.5% charge on sales for using its card. Prepare journal entries to record the following selected credit card transactions of Levine company.

Apr. 8 Sold merchandise for $6,000 (that had cost $4,434) and accepted the customer's Suntrust Bank Card.
12 Sold merchandise for $7,200 (that had cost $4,666) and accepted the customer's Continental Card.
20 Received Continental's check for the April 12 billing, less the service charge.

Journal Entries

Apr 08 Debit Bank $5,760 Debit Service charges $240 Credit Revenue $6,000

         Debit Cost of goods sold $4,434 Credit Inventory $4,434

Apr 12 Debit Accounts Receivable $7,020 Debit Service charges $180 Credit Revenue $7,200

           Debit Cost of goods sold $4,666  Credit Inventory $4,666

Apr 20 Debit Bank $7,020 Credit Accounts Receivable $7,020

Explanation:

Judging by the last transaction, The business first requires deposits from Continental card's bank hence the receiving of check at a later stage.

April 8

Dr Cash 5,760

Dr Credit card expense 240

Cr Sales 6,000

Dr costs of goods sold 4,434

Cr merchandise inventory4,434

April 12

Dr Cash 7,020

Dr Credit card expense180

Cr Sales7,200

Dr costs of goods sold4,666

Cr merchandise inventory4,666

C. April 20

Dr Cash 7,020

Cr Account receivable 7,020

Explanation:

A April 8

Dr Cash 5,760(6,000 X 0.96= 8,064)

Dr Credit card expense 240(6,000 X 0.04=336)

Cr Sales 6,000

Dr costs of goods sold 4,434

Cr merchandise inventory4,434

B. April 12

Dr Cash 7,020 (7,200 X .096= 5,460)

Dr Credit card expense180 (7,200 X 0.025= 180)

Cr Sales7,200

Dr costs of goods sold4,666

Cr merchandise inventory4,666

C. April 20

Dr Cash 7,020

Cr Account receivable 7,020

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