Cushion Sports accepted a credit card account receivable in exchange for $5,000 of services provided to a customer.The credit card company charges a 5% service charge.Recording the transaction will have what effect?

Question

Quizplus · Accepted Answer

The correct transaction recording reflects the acceptance of a credit card payment for services, which results in an increase in assets (accounts receivable or cash) by the net amount received ($4,750 after the 5% service charge on $5,000), and an increase in equity due to the revenue earned from services provided. The service charge reduces the amount actually received, hence the net effect is an increase in assets and equity by $4,750, not the full $5,000.

Cushion Sports Accepted a Credit Card Account Receivable in Exchange