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When a company factored $45,000 of its accounts receivable and was charged a 4% factoring fee. The journal entry to record this transaction would include.
Account Debit Credit
Cash $43,200
Factoring fees $1,800
Accounts receivable $45,000
Thus, here the factoring fee is equivalent to 4% of total accounts receivable which is calculated as= $45,000 x 4% or $1,800.
Cash received is equivalent to total accounts receivable less factoring fee of $1,800, hence cash received = $45,000 - $1,800 = $43,200.
Hence, the journal entry to record this transaction would include a debit to cash of $43,650, a debit to factoring fee Expense of $1,350, and credit to account receivable of $45,000.
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