Respuesta :
Answer:
Cash $725200 Dr
Loss on Sale-Factoring $14800 Dr
Accounts receivable $740000 Cr
Explanation:
When factoring is done, the company actually sells its receivables and receives cash from the firm buying the accounts receivables. The factoring or buying firm will also charge a % fee that the selling firm will record as a loss in its accounts.
The cash received on factoring of this arrangement is 740000 * 0.98 = 725200
The loss on sale is 740000 * 0.02 = 14800
Thus the company will debit the cash that it is receiving and debit the loss on sale as it is an expense which is increasing. The accounts receivables will be credit from the books as they no longer belong to Pharaoh
Answer:
Debit Cash account $725,200
Debit Factoring loss (p/l) $14,800
Credit Accounts receivable $740,000
Being entries to account for factored receivables.
Explanation:
Debt factoring is the process by which a company sells its receivables to another party for cash usually at an amount lower than the accounts receivable amount. The party that purchased the debt now own then owns it and runs after the customer for settlement.
The entries required in the books of the selling party are
Debit Cash account
Debit Factoring loss (p/l)
Credit Accounts receivable
Being entries to account for factored receivables.
Factoring loss = 2% × $740,000
= $14,800
Cash received = $740,000 - $14,800
= $725,200
