Credit Card Sales

Zippos is a small family-owned company that sells shoes and other footwear from its store on Main St. in Lancaster PA as well as through its website, Zippos.com. The following information is available for its most recent fiscal year:

Sales for the year total $5.2 million. The company accepts cash, VISA credit cards, and company-issued credit cards. It uses the LIFO inventory-costing method.

Total sales and cost of goods sold are composed of the following:

Cash sales of $450,000; related cost of goods sold of $225,000

VISA credit card sales of $3.7 million; related cost of goods sold of $1.8 million. VISA charges the company a 2.5% fee for its services, which include immediate access by Zippos to cash when customers use their VISA cards and absorbing any bad debts.

Sales charged to company-issued credit cards of $1.05 million, with terms of 2/10, n/30; related cost of goods sold of $505,000. 80% of the customers pay within the discount period; 15% pay after the discount period; 5% never pay and are written off as uncollectible.

Zippos is responsible for shipping products to its online customers. It uses the US Postal Service (USPS) and incurs total shipping costs of $190,000 during the year.

Customers return $590,000 of products to Zippos during the year; customers receive credits on their VISA accounts for the full amount of those sales. Related cost of goods sold is $300,000. Shipping costs on returns are paid by the customers.

Instructions: Prepare all required annual summary journal entries to record Zippos sales, cost of goods sold, cash collections, write offs, shipping costs, and customer returns.