TechCom Factored $35,000 of Its Accounts Receivable and Was Charged

question 78

True/False

TechCom factored $35,000 of its accounts receivable and was charged a 2% factoring fee. The journal entry to record this would include a debit to Cash of $35,000; a debit to Factoring Fee Expense of $700; and a credit to Accounts Receivable of $35,700.

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Definitions:

Current Ratio

A financial ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.

Cash Discount

A reduction in the invoice price offered by sellers to buyers as an incentive for early payment.

Invoice Date

The date on which an invoice is issued, marking the beginning of the period in which payment is expected according to the terms of sale.

Profit Margin Ratio

A financial metric used to assess a company’s profitability by comparing net income to revenue.