A Company Factored $45,000 of Its Accounts Receivable and Was

question 46

Multiple Choice

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 a:

• A) Debit to Cash of $45,000, a debit to Factoring Fee Expense of $1,800, and a credit to Accounts Receivable of $46,800.
• B) Debit to Cash of $45,000 and a credit to Accounts Receivable of $45,000.
• C) Debit to Cash of $43,200, a debit to Factoring Fee Expense of $1,800, and a credit to Accounts Receivable of $45,000.
• D) Debit to Cash of $45,000 and a credit to Notes Payable of $45,000.
• E) Debit to Cash of $46,800 and a credit to Accounts Receivable of $46,800.

---

Definitions:

Net Income

The amount of earnings left over after all expenses, including taxes and costs of goods sold, have been deducted from total revenue.

Stockholders' Equity Accounts

These accounts represent the owners' equity in a corporation, including common stock, retained earnings, and additional paid-in capital.

Net Income

The net income a corporation earns once all costs, taxes, and expenses are deducted from the total revenue.

Earnings Per Share

A measure of a company's profitability, calculated as net income divided by the number of outstanding shares of its common stock.