Armistad Inc. wishes to speed up cash flow and contacts Free Cash.com to sell $600,000 in Accounts Receivable, receiving 98% in cash for the receivables. Armistad should debit cash for
$588,000 and also debit Financing Expense for $12,000, then credit Accounts Receivable for
$600,000.

Question

Quizplus · Accepted Answer

Armistad Inc. receives 98% of $600,000, which is $588,000 in cash. The difference of $12,000 is recorded as a Financing Expense. The total $600,000 is credited from Accounts Receivable.