Question

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

Answer 1

Answer:

Cash                                        291000 Dr

Factoring fees expense          9000 Dr

        Accounts Receivables        300000 Cr

Explanation:

The factoring charge or fess is an expense for Laurel Company for the service provided by Hardy factors. So, whenever factoring is done, the ffactoring fees expense account will be debited as expense will increase. Th cash received is 300000 * 0.97 = 291000

The factoring fees is 300000*0.03 = 9000

As a result all of the accounts receivables will be credited from the books.