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Credit sales: interest and service fees

Presented below are two independent situations.

(a) On April 2, Julie Keiser uses her JCPenney Company credit card to purchase merchandise from a JCPenney store for $1,800. On May 1, Keiser is billed for the $1,800 amount due. Keiser pays $700 on the balance due on May 3. On June 1, Keiser receives a bill for the amount due, including interest at 1% per month on the unpaid balance as of May 3. Prepare the entries on JCPenney Co.'s books related to the transactions that occurred on April 2, May 3, and June 1.

(b) On July 4, Newark's Restaurant accepts an American Express card for a $350 dinner bill. American Express charges a 4% service fee. On July 10, American Express pays Newark $336. Prepare the entries on Newark's books related to the transactions.

Journalize entries for credit card sales.

Solution Preview

JC Penneys entries Debit Credit

2-Apr Accounts receivable (or unbilled sales) 1,800
Credit sales 1,800
To record sale to Julie

3-May Cash 700
Accounts receivable 700
To record partial payment on ...

Solution Summary

The solution reports journal entries for credit sale by JC Penneys, and service fees charged by American Express.