Problem #3

Accounting major Earl Washington has an on-campus business assembling and delivering "care packages"

to freshmen students. Earl accepts cash and two major credit cards: Big Bank and Plastic Fantastic, from

parents who order the packages. Big Bank deducts a 5% service charge on all sales, and deposits the

money into the checking accounts of its customers as soon as the credit card receipts are received. Earl

deposits Big Bank receipts daily. Plastic Fantastic deducts a 3% service charge on all sales. They usually

take about 10 days to pay once the credit card receipts are received. Earl deposits Plastic Fantastic receipts

weekly. The following transactions were completed during September.

1-Sep Made $670 (that had cost $450) of sales to parents who used the Big Bank card.

2-Sep Cash sales for the day amounted to $256 (that had cost $175).

5-Sep Made $1290 (that had cost $850) of sales to parents who use the Plastic Fantastic card.

6-Sep Made another $2050 (that had cost $1425) of sales to parents who used the Plast Fant card.

7-Sep Submitted Plastic Fantastic card receipts to the credit card company for payment.

10-Sep Made $1440 (that had cost $1020) of sales to parents who use the Big Bank card.

17-Sep Received the amount due from Plastic Fantastic.

Required: Prepare journal entries to record the preceding transaction and events (company uses the

perpetual inventory system)