Asked by Keyona Lyles on Jul 26, 2024
Verified
Jervis sells $75,000 of its accounts receivable to Northern Bank in order to obtain necessary cash.Northern Bank charges a 5% factoring fee.What entry should Jervis make to record the transaction?
A) Debit Cash $71,250; debit Factoring Fee Expense $3,750; credit Accounts Receivable $75,000
B) Debit Accounts Receivable $71,250; debit Factoring Fee Expense $3,750; credit Cash $75,000
C) Debit Cash $75,000; credit Factoring Fee Expense $3,750; credit Accounts Receivable $75,000
D) Debit Cash $71,250; credit Accounts Receivable $71,250
E) Debit Accounts Receivable $75,000; credit Factoring Fee Expense $3,750; credit Cash $71,250
Factoring Fee Expense
A cost incurred by a business when it sells its accounts receivable to a third party (the factor) at a discount.
Accounts Receivable
Funds that clients or customers owe to a company for products or services that have been provided but not yet compensated for.
Necessary Cash
The minimum amount of cash required by a company to carry out its day-to-day operations.
- Record transactions involving the sale of accounts receivable to a bank or factoring company.
Verified Answer
Jul 31, 2024
Learning Objectives
- Record transactions involving the sale of accounts receivable to a bank or factoring company.
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