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26 August, 17:25

Laurel Company factors $300,000 of receivables to Hardy Factors. Hardy assesses a 3% fee on the amount of receivables sold. Laurel Co. factors its receivables to Hardy regularly. What journal entry does Laurel make when the factoring occurs?

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  1. 26 August, 17:35
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    Cash 291000 Dr

    Factoring fees expense 9000 Dr

    Accounts Receivables 300000 Cr

    Explanation:

    The factoring charge or fess is an expense for Laurel Company for the service provided by Hardy factors. So, whenever factoring is done, the ffactoring fees expense account will be debited as expense will increase. Th cash received is 300000 * 0.97 = 291000

    The factoring fees is 300000*0.03 = 9000

    As a result all of the accounts receivables will be credited from the books.
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