Question

On October 1, 2018, Sunland Company sells (factors) $711000 of receivables to Beanfield Factors, Inc. Beanfield assesses a service charge of 3% of the amount of receivables sold. The journal entry to record the sale by Sunland will include:

Answer 1

Journal Entry will be here as

cash ================ $689670

service charge ======== $21330

Accounts receivable === $711000

Step-by-step explanation:

given data

Accounts receivable = $711000

service charge rate = 3 %

to find out

The journal entry to record the sale

solution

When we receivables is sold then service charge is taken

so Amount of service charge will be

Amount of service charge = Accounts receivable × service charge rate

Amount of service charge = $711000 × 3%

Amount of service charge = $21330

and

Net amount received by factoring is

Net amount received = Accounts receivable - service charge

Net amount received = $711000 - $21330

Net amount received = $689670

and

so Journal Entry will be here as

cash ================ $689670

service charge ======== $21330

Accounts receivable === $711000