Mayfair Co. allows select customers to make purchases on credit. Its other custo
ID: 2563747 • Letter: M
Question
Mayfair Co. allows select customers to make purchases on credit. Its other customers can use either of two credit cards: Zisa or Access. Zisa deducts a 4.5% service charge for sales on its credit card and credits the bank account of Mayfair immediately when credit card receipts are deposited. Mayfair deposits the Zisa credit card receipts each business day. When customers use Access credit cards, Mayfair accumulates the receipts for several days before submitting them to Access for payment. Access deducts a 3.5% service charge and usually pays within one week of being billed. Mayfair completes the following transactions in June. (The terms of all credit sales are 2/15, n/30, and all sales are recorded at the gross price.)
June
4 Sold $600 of merchandise (that had cost $300) on credit to Natara Morris.
5 Sold $9,400 of merchandise (that had cost $4,700) to customers who used their Zisa cards.
6 Sold $5,674 of merchandise (that had cost $2,837) to customers who used their Access cards.
8 Sold $4,250 of merchandise (that had cost $2,125) to customers who used their Access cards.
10 Submitted Access card receipts accumulated since June 6 to the credit card company for payment.
13 Wrote off the account of Abigail McKee against the Allowance for Doubtful Accounts. The $473 balance in McKee’s account stemmed from a credit sale in October of last year.
17 Received the amount due from Access.
18 Received Morris’s check in full payment for the purchase of June 4.
Explanation / Answer
solution:
date account title debit credit Jun-04 Account receivable -N Morris 600 sales 600 cost of goods sold 300 merchandise Inventory 300 Jun-05 cash 8,977 credit card expense (9400*4.5%) 423 sales 9,400 cost of goods sold 4,700 merchandise Inventory 4,700 Jun-06 Account receivable - Access 5,475 credit card expense (5675*3.5%) 199 sales 5,674 cost of goods sold 2,837 merchandise Inventory 2,837 Jun-08 Account receivable - Access 4,101 credit card expense (5675*3.5%) 149 sales 4,250 cost of goods sold 2,125 merchandise Inventory 2,125 Jun-10 No entry Jun-13 Allowance for doubtful accounts 473 Accounts receivable—A. McKee 473 Jun-17 cash 9,577 Account receivable - Access 9,577 (547+4101) Jun-18 cash 588 sales discount (600*.02) 12 Account receivable -N Morris 600