Jervis Sells $75,000 of Its Accounts Receivable to Northern Bank

question 178

Multiple Choice

Jervis sells $75,000 of its accounts receivable to Northern Bank in order to obtain necessary cash. Northern Bank charges a 5% factoring fee. What entry should Jervis make to record the transaction?

• A) Debit Cash $75,000; credit Factoring Fee Expense $3,750; credit Accounts Receivable $75,000
• B) Debit Cash $71,250; credit Accounts Receivable $71,250
• C) Debit Accounts Receivable $75,000; credit Factoring Fee Expense $3,750; credit Cash $71,250
• D) Debit Cash $71,250; debit Factoring Fee Expense $3,750; credit Accounts Receivable $75,000
• E) Debit Accounts Receivable $71,250; debit Factoring Fee Expense $3,750; credit Cash $75,000

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Definitions:

Grapevine

An informal communication network within an organization, where information is often passed through word of mouth.

Communication Work

The effort or activity involved in conveying information or expressing ideas effectively, especially in professional settings.

ERG Theory

A refinement of Maslow’s hierarchy that includes only three needs areas: existence (mostly figure needs); relatedness (needs linked to relationships); and growth (internal esteem needs and self-actualization).

Existence

The state or fact of living, being, or having a presence.