EXERCISE 8-4
| Purpose: | (L.O. 4) This exercise will illustrate the factoring of accounts receivable. |
The Tuscawilla Tailgate Company often factors its accounts receivable. On May 1, 2014, the company factored $250,000 of customer accounts receivable to Fagan Factors, Inc. which charged a 3% service charge.
Instructions
- Prepare the journal entry to record the sale of the accounts receivable to the factor.
- Explain how the service charge will affect Tuscawilla Tailgates' financial statements.
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