Question

Prepare journal entries for the following credit card sales transactions (the company uses the perpetual inventory system).

2. Sold \(5,000 of merchandise, which cost \)3,000, on an assortment of bank credit cards. These cards charge a 4% fee.

Short answer

A credit card is a plastic money service issued by a financial institution such as banks to lend money to the credit card holder in exchange for payment of regular interest and the loan amount.

Step-by-step solution

Introduction

The credit card sales transactions will be recorded in the journal book of an organization as below.

Recording of the journal entry

Date	Particulars	Debit	Credit
a	Cash	$4,800
	Credit card expense ($5,000*4%)	$200
	Sales		$5,000
	(To record the sales)
b	Cost of goods sold	$3,000
	Merchandise inventory		$3,000
	(To record the cost of goods sold)