Question

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

Answer 1

Answer:

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.