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26 July, 13:51

Gipson Furniture factors $700,000 of receivables to Kwik Factors, Inc. Kwik Factors assesses a 3% service charge on the amount of receivables sold. Gipson Furniture factors its receivables regularly with Kwik Factors. What journal entry does Gipson make when factoring these receivables

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  1. 26 July, 17:23
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    Dr Cash 679,000

    Dr Service charge expenses 21,000

    Cr Accounts receivable 700,000

    Explanation:

    A factoring business is a company that purchases debt from other companies and then collects them. They generally purchase accounts receivables at a discount from companies that need cash fast.
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