If a retailer regularly sells its receivables to a factor, the service charge of the factor should be classified as a(n)

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When a retailer sells its receivables to a factor, it is essentially transferring ownership of the receivables to the factor in exchange for immediate cash. The factor then collects the payments from the customers directly. The service charge that the retailer pays to the factor is classified as a selling expense, as it is a cost associated with the selling function of the retailer's business. It is not classified as interest expense, as it is not related to borrowing money, and it is not classified as a contra asset, as it does not reduce the value of any asset account. It is also not classified as other expense, as this term is typically used to refer to more unusual, non-recurring expenses.

If a Retailer Regularly Sells Its Receivables to a Factor