Gipson Furniture factors $500,000 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?
Answer
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a. Cash 485,000 Loss on Sale of Receivables 15,000 Accounts Receivable 500,000 |
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Cash 485,000 Accounts Receivable 485,000 |
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Cash 500,000 Accounts Receivable 485,000 Gain on Sale of Receivables 15,000 |
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Cash 485,000 Service Charge Expense 15,000 Accounts Receivable 500,000 |