Question

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

Answer 1

Answer:

The answers are:

Dr Cash 291,000

Dr Service Charge Expense 9,000

Cr Accounts Receivable 300,000

Explanation:

When assets increase, they are debited. Since cash increases then it should be recorded as a debit. Since accounts receivable decreases, then it should be recorded as a credit.

When expenses increase, they are debited. Since service charge expenses increases, then it should be recorded as a debit.