29 Jervis sells $3,500 of its accounts receivable to Northern Bank in order to o

Question

29

Jervis sells $3,500 of its accounts receivable to Northern Bank in order to obtain necessary cash. Northern Bank charges a 4% factoring fee. What entry should Jervis make on to record the transaction?

Debit Accounts Receivable $3,500; credit Cash $3,500.

Debit Cash $3,500; credit Accounts Receivable $3,500.

Debit Cash $3,640; credit Factoring Fee Expense $140; credit Accounts Receivable $3,500.

Debit Cash $3,360; debit Factoring Fee Expense $140; credit Accounts Receivable $3,500.

Credit Cash $3,360; credit Factoring Fee Expense $140; debit Accounts Receivable $3,500.

Jervis sells $3,500 of its accounts receivable to Northern Bank in order to obtain necessary cash. Northern Bank charges a 4% factoring fee. What entry should Jervis make on to record the transaction?

Explanation / Answer

CASH A/C............................................DR $3360

FACTORING FEES A/C.......................DR $140

   TO ACCOUNTS RECEIVABLE $3500

ANSWER = OPTION 4

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