Asked by Bradley Chappelle on May 10, 2024
Verified
Kirk Furniture factors $800000 of receivables to Sulu Factors Inc. Sulu Factors assesses a 4% service charge on the amount of receivables sold. Kirk Furniture factors its receivables regularly with Sulu Factors. What journal entry does Kirk make when factoring these receivables? a.
Cash768,000 Loss on Sale of Receivables32,000 Accounts Receivable500,000\begin{array}{lrr} \text { Cash} &768,000\\ \text { Loss on Sale of Receivables} &32,000\\ \text { Accounts Receivable} &&500,000\end{array} Cash Loss on Sale of Receivables Accounts Receivable768,00032,000500,000
b.
Cash768,000Accounts Receivable 768,000\begin{array}{lrr} \text { Cash} &768,000\\ \text {Accounts Receivable } &&768,000\\\end{array} CashAccounts Receivable 768,000768,000
c.
Cash 800,000 Accounts Receivable 768,000 Gain on Sale of Recenables 32,000\begin{array}{lrr} \text { Cash } &800,000\\ \text { Accounts Receivable } &&768,000\\ \text { Gain on Sale of Recenables } &&32,000\end{array} Cash Accounts Receivable Gain on Sale of Recenables 800,000768,00032,000
d.
Cash 768,000 Service Charge Expens32,000 Accounts Receivable 800,000\begin{array}{lrr} \text { Cash } &768,000\\ \text { Service Charge Expens} &32,000\\ \text { Accounts Receivable } &&800,000\end{array} Cash Service Charge Expens Accounts Receivable 768,00032,000800,000
Service Charge Expense
Costs incurred by a company for the services provided by another entity, often including bank fees or utilities.
Factoring Receivables
A financial transaction where a business sells its accounts receivable to a third party at a discount in exchange for immediate cash.
- Acknowledge the ramifications of assigning receivables to a factor, taking into account the treatment of service charges.
Verified Answer
EH
Learning Objectives
- Acknowledge the ramifications of assigning receivables to a factor, taking into account the treatment of service charges.