Question

Oliver furniture factors $800,000 of receivables to kwik factors, inc. Kwik factors assesses a 2% service charge on the amount of receivables sold. Oliver furniture factors its receivables regularly with kwik factors. What journal entry does oliver make when factoring these receivables?.

Answer 1

The journal entry that Oliver make when factoring these receivables is:

Debit Cash $784,000

Debit Service Charge Expense $16,000

Credit Accounts receivable $800,000

Oliver furniture journal entry

Debit Cash $784,000

[(100%-2%)×$800,000]

Debit Service Charge Expense $16,000

(2%×$800,000)

Credit Accounts receivable $800,000

(To record account receivables)

Inconclusion the journal entry that Oliver make when factoring these receivables is: Debit Cash $784,000; Debit Service Charge Expense $16,000; Credit Accounts receivable $800,000.

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