Answer:
Debit Cash for $406,602; Debit Finance charge for $7,938; Debit Loss on sale of receivables for 26,460; and Credit Accounts receivable for $441,000.
Explanation:
Before preparing the journal entry, the following calculations are made firs:
Finance charge = Percentage of finance charge * Accounts receivable = 1.80% * $441,000 = $7,938
Loss on sale of receivables = Percentage retained * Accounts receivable = 6% * $441,000 = $26,460
Cash = Accounts receivable - Finance charge - Loss on sale of receivables = $441,000 - $7,938 - $26,460 = $406,602
The journal entry will now look as follows:
<u>Date Details Debit ($) Credit ($) </u>
01 Jul '20 Cash 406,602
Finance charge 7,938
Loss on sale of receivables 26,460
Accounts receivable 441,000
<u><em> (To record factoring of accounts receivable.) </em></u>
