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Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition by Donald E. Kieso, Paul D. Kimmel, Jerry J. Weygandt

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EXERCISE 8-3

Purpose: (L.O. 4) This exercise will illustrate the journal entries related to credit card sales.

Bubba's Bed & Bath Shop accepts MasterCard, VISA, and its own Bubba's Bed & Bath Shop (BB&BS) credit cards. MasterCard and VISA sales slips are deposited in the bank daily; the bank charges a 3% fee. The following transactions occurred on May 3, 2014.

  1. Made sales of $7,200 to customers who presented MasterCard and VISA cards.
  2. Made sales to the following who used their BB&BS cards:
    1. Nadine Adam, $120
    2. Connie Dawson, $240
    3. Dale Bandy, $500

Instructions

  1. Prepare the journal entries to record the transactions above for Bubba's Bed and Bath Shop.
  2. Prepare the journal entry to record collections of $120, $40, and $100 from Nadine Adam, Connie Dawson, and Dale Bandy, respectively.
  3. Prepare the journal entry to record interest charged to customer accounts at the rate of 1.5% per month as follows: Connie Dawson, $3; Dale Bandy, $6.

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