12) Lee’s Lions has made a profit in each of the last two months. However, it is not generating enough cash from credit sales to cover all of its current expenses. The owners understand the value of increasing sales volume by offering customers the ability to purchase on credit, but they are frustrated by the current situation. Explain to them the issues in granting credit and the management of accounts receivable.
13) The Multiplex Mart accepts VISA. During March, $140,000 in credit card sales were made. VISA charges 3% of sales as its service fee. Prepare the entry to record the credit card sales. Include the account titles and amounts.
Shareholders' equity
Assets
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Liab.
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CC
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Retained earnings
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14) Why are credit card sales important to businesses?
15) The Magic Cow accepts MasterCard. A customer made a $10,000 purchase using MasterCard. MasterCard charges Magic Cow 4% of sales as a service fee. Prepare the entry to record the sale including account titles and amounts.
Shareholders' equity
Assets
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Liab.
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CC
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Retained earnings
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16) Fox Company accepts VISA from its customers. VISA charges Fox Company 6% of sales.
Part A:
Show the effect of the following events on the accounting equation, including both account titles and amounts:
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Assets
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Liabilities
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Shareholder’s equity
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CC
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Retained earnings
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During 2012, Fox’s customers used VISA to purchase $15,000 worth of merchandise. The cost of the goods sold was $5,000.
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In 2012, Fox collected the full amount due from VISA.
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Part B:
Why would Fox Company accept VISA?