Goran Company accepted a credit card account receivable in exchange for $5,500 of services provided to a customer. The credit card company charges a 5% service charge. The collection of cash from the credit card company when it settles the account receivable balance will act to:
A)increase assets by $275.
B)decrease assets and equity by $275.
C)increase assets by $5,500.
D)none of these.

Question

Quizplus · Accepted Answer

The collection of the receivable from the credit card company increases one asset (cash) and decreases another asset (accounts receivable - credit card) by $5,225 ($5,500 - 5% service charge).

Goran Company Accepted a Credit Card Account Receivable in Exchange