Answer:
Debit Cash account $725,200
Debit Factoring loss (p/l) $14,800
Credit Accounts receivable $740,000
Being entries to account for factored receivables.
Step-by-step explanation:
Debt factoring is the process by which a company sells its receivables to another party for cash usually at an amount lower than the accounts receivable amount. The party that purchased the debt now own then owns it and runs after the customer for settlement.
The entries required in the books of the selling party are
Debit Cash account
Debit Factoring loss (p/l)
Credit Accounts receivable
Being entries to account for factored receivables.
Factoring loss = 2% × $740,000
= $14,800
Cash received = $740,000 - $14,800
= $725,200