Advanced Packaging accepted a credit card account receivable in exchange for $25,000 of services provided to a customer. The credit card company charges a 4% service charge. Recording the transaction in the company's accounting records will have what effect on the accounting equation?

Question

Quizplus · Accepted Answer

When Advanced Packaging receives the credit card account receivable, there is an increase in assets (accounts receivable) and stockholders' equity (revenue earned). The amount of the transaction is $25,000 but since the credit card company charges a service charge of 4%, the amount that Advanced Packaging will receive is $24,000 ($25,000 - ($25,000 x 4%)). Therefore, the effect on the accounting equation will be an increase in assets and stockholders' equity by $24,000.

Advanced Packaging Accepted a Credit Card Account Receivable in Exchange