Schofield Retailers accepted $40,000 of Silver Bank MasterCard credit card charges for merchandise sold on August 1. Silver Bank charges 4% for its credit card use. The entry to record this transaction by Schofield Retailers will include a credit to Sales Revenue of $40,000 and a debit(s) to

Question

Quizplus · Accepted Answer

The credit card charges will be deposited into the Schofield Retailers' bank account, which will be recorded as a debit to Cash. However, since Silver Bank charges a 4% fee for its credit card usage, Schofield Retailers will only receive $38,400 ($40,000 x 0.96). Therefore, the entry will include a debit to Cash for $38,400. Additionally, the 4% fee charged by Silver Bank is an expense to Schofield Retailers, which will be recorded as a separate debit to Service Charge Expense for $1,600 ($40,000 x 0.04). The credit portion of the entry will be a credit to Sales Revenue for $40,000. Therefore, the correct entry will be:
Debit: Cash - $38,400; Service Charge Expense - $1,600
Credit: Sales Revenue - $40,000

Schofield Retailers Accepted $40,000 of Silver Bank MasterCard Credit Card