Hankco accepts all major bank credit cards, including Omni Bank's, which assesses a 3% charge on sales for using its card. On June 28, Hankco had $4,500 in Omni Card credit sales. What entry should Hankco make on June 28 to record the deposit?
A. Debit Accounts Receivable $4,365; debit Credit Card Expense $135; credit Sales $4,500.
B. Debit Accounts Receivable $4,500; credit Sales $4,500.
C. Debit Cash $4,500; credit Sales $4,500.
D. Debit Cash $4,365; debit Credit Card Expense $135; credit Sales $4,500.
E. Debit Cash $4,635; credit Credit Card Expense $135; credit Sales $4,500
mention and explain five types of credit sales you know
To answer this question, we need to understand the impact of the 3% charge on Omni Bank credit sales. The information provided states that Omni Bank assesses a 3% charge on sales for using its card.
Based on this information, the correct answer is option D.
Here's how we arrived at this answer:
1. The total credit sales using Omni Bank's card on June 28 is $4,500.
2. Since Omni Bank charges a 3% fee on these sales, we need to calculate the amount of the fee. 3% of $4,500 is $135.
3. The Accounts Receivable account needs to be reduced by the amount of the fee since Hankco will not receive the full $4,500. Therefore, a debit entry of $4,365 is made to the Accounts Receivable account.
4. The Credit Card Expense account needs to be debited by the amount of the fee, which is $135.
5. Lastly, the Sales account needs to be credited for the total credit sales, which is $4,500.
Therefore, the correct entry to record the deposit on June 28 is:
Debit Cash $4,365; Debit Credit Card Expense $135; Credit Sales $4,500.