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11 February, 07:54

Concord Furniture factors $893000 of receivables to Pharoah, Inc. Pharoah assesses a 3% service charge on the amount of receivables sold. Concord Furniture factors its receivables regularly with Pharoah. What journal entry does Concord make when factoring these receivables

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  1. 11 February, 08:22
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    For recording the factory receivable we simply debited cash and service charge expenses and credited accounts receivable.

    Explanation:

    The Journal Entry is shown below:-

    Cash Dr, $860,210

    Service charge expenses Dr, $26,790

    To Accounts receivable $893,000

    (Being factory receivable is recorded)

    Working note

    Service charge expenses = $893,000 * 3%

    = $26,790

    For recording the factory receivable we simply debited cash and service charge expenses and credited accounts receivable.
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