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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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
Transcribed Image Text:### Understanding Accounting Transactions
When processing accounting transactions, it's important to accurately record debit and credit entries in the appropriate accounts. Below are examples of such transactions for educational purposes.
#### Example Transactions
1. **Tony's Restaurant Visa Payment**
- Tony's Restaurant accepted a Visa card in payment for a $175 lunch bill. The bank charges a 4% fee. What entry should Tony's make?
2. **Larkin Company Accounts Receivable Sale**
- Larkin Company sold its accounts receivable of $60,000. What entry should Larkin make, given a service charge of 3% on the amount of receivables sold?
#### Journal Entries
- **Transaction a**:
**Account Titles and Explanation | Debit ($) | Credit ($)**
- Accounts Receivable (from Visa) | 168 |
- Credit Card Expense | 7 |
- Sales Revenue | | 175
*Explanation*: This entry records the Visa card transaction, where $168 is debited to Accounts Receivable (net of the 4% fee of $7), and the Sales Revenue is credited for the full amount of $175.
- **Transaction b**:
**Account Titles and Explanation | Debit ($) | Credit ($)**
- Cash | 58,200 |
- Service Charge Expense | 1,800 |
- Accounts Receivable | | 60,000
*Explanation*: This entry records the sale of accounts receivable with a 3% service charge. $58,200 is debited to Cash, $1,800 is debited to Service Charge Expense, and $60,000 is credited to Accounts Receivable.
### List of Accounts
- Accounts Receivable
- Credit Card Expense
- Sales Revenue
- Service Charge Expense
- Cash
Expert Solution
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