Question

Levine Company uses the perpetual inventory system and allows customers to use two credit cards in charging purchases. With the Suntrust Bank Card, a 4% service charge for credit card sales is assessed. The second credit card that Levine accepts is the Continental Card. Continental assesses a 2.5% charge on sales for using its card. Prepare journal entries to record the following selected credit card transactions of Levine Company.

Apr. 8 Sold merchandise for \(8,400 (that had cost \)6,000) and accepted the customer's Sunburst Bank Card.

12 Sold merchandise for \(5,600 (that had cost \)3,500) and accepted the customer’s Continental Card.

Short answer

Credit card transactions are those financial transactions made using a credit card.A service charge fee is processed along with the product's purchase pricewhen using a credit card.

Step-by-step solution

Introduction

Each transaction on April 8 and April 12 will be recorded by taking into account the service charge and the charge on sales on each credit card used by the debtor for purchasing the goods from Levine Company.

Journal entry