Tuckahoe Corporation accepted credit cards for $38,000 of services performed in March Year 1. The credit card company charged a 3½% service fee and paid Tuckahoe as soon as it received the credit card receipts.Required:a) Prepare the general journal entry to record performance of the services.b) Prepare the general journal entry for collection of the receivable from the credit card company.
What will be an ideal response?
a) The credit card sale increases total assets (accounts receivable-credit card company) by $36,670 [or $38,000 ? ($38,000 × 3.5%)]. It increases revenue by $38,000 and increases expenses (credit card expense) by $1,330 (or $38,000 × 3.5%).
b) The collection from the credit card company increases assets (cash) by $36,670 and decrease assets (accounts receivable-credit card company) by the same amount.
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