Question

Record the sale by balus company of $125,000 in accounts receivable on May 1. balus is charged a 2.5% factoring fee. What is the amount of the factoring fee?

1) 2,500
2) 3,125
3) 3,250
4) 3,500

Answer 1

The calculation of the factoring fee for Balus Company when selling $125,000 in accounts receivable with a 2.5% factoring fee results in a fee amount of $3,125.

Step-by-step explanation:

The question relates to the calculation of a factoring fee when a company sells its accounts receivable. If Balus Company records the sale of $125,000 in accounts receivable and is charged a 2.5% factoring fee, to calculate the amount of the factoring fee, we multiply the total amount of accounts receivable by the percentage of the factoring fee:

Factoring Fee = Total Accounts Receivable x Factoring Fee Percentage

Factoring Fee = $125,000 x 0.025

Factoring Fee = $3,125

Therefore, the correct amount of the factoring fee is $3,125, which corresponds to option 2.