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 Factors. What journal entry does Kirk make when factoring these receivables?

The journal entry is shown below:

Cash A/c Dr $768,000

Service Charge Expense A/c $32,000

To Accounts Receivable A/c $800,000

(Being the cash is received and the remaining balance is debited to the cash account)

The computation of the service charge expense is shown below:

= Accounts Receivable * service charge percentage

= $800,000 * 4%

= $32,000