A customer charges a treadmill at Mike's Sport Shop. The price is $2,000 and the financing charge is 9% per annum if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account.
The accounts affected by the journal entry made by Mike's Sport Shop to record the finance charge are

Question

Quizplus · Accepted Answer

The finance charge is recorded as interest revenue, increasing the accounts receivable since the customer owes more due to the interest.

A Customer Charges a Treadmill at Mike's Sport Shop