Question

Kromer Company receives cash immediately from its credit card sales. The credit card company charges 3% of card sales as its fee. If credit card sales are $10,000, which of the following statements are true?
A) Kromer Company debits Accounts Receivable – Credit Card Co $9,700.
B) Kromer Company debits Cash $10,000.
C) Kromer Company debits Cash $9,700.
D) Kromer Company debits Accounts Receivable – Credit Card Co $10,000.

Answer 1

Answer:

The answer is: C) Kromer Company debits Cash $9,700.

Explanation:

When assets increase, you should record a debit. When liabilities increase, you should record a credit.

Since cash is a current asset, then you should record a debit for $9,700.

$9,700 is the difference between the sales ($10,000) and the amount the credit card company charges ($300).