Jervis sells $75,000 of its accounts receivable to Northern Bank in order to obtain necessary cash. Northern Bank charges a 5% factoring fee. What entry should Jervis make to record the transaction?
A) Debit Cash $75,000; credit Factoring Fee Expense $3,750; credit Accounts Receivable $75,000
B) Debit Cash $71,250; credit Accounts Receivable $71,250
C) Debit Accounts Receivable $75,000; credit Factoring Fee Expense $3,750; credit Cash $71,250
D) Debit Cash $71,250; debit Factoring Fee Expense $3,750; credit Accounts Receivable $75,000
E) Debit Accounts Receivable $71,250; debit Factoring Fee Expense $3,750; credit Cash $75,000

Question

Quizplus · Accepted Answer

Jervis receives cash of $71,250 after the 5% fee ($3,750) is deducted from the $75,000 accounts receivable. The entry debits Cash for $71,250, debits Factoring Fee Expense for $3,750, and credits Accounts Receivable for $75,000.

Jervis Sells $75,000 of Its Accounts Receivable to Northern Bank