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

question 33

Multiple Choice

A company factored $45,000 of its accounts receivable and was charged a 3% 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 $1,350, and credit to Accounts Receivable of $43,650.
• B) Debit to Cash of $45,000 and a credit to Accounts Receivable of $45,000.
• C) Debit to Cash of $43,650, a debit to Factoring Fee Expense of $1,350, and a credit to Accounts Receivable of $45,000.
• D) Debit to Cash of $46,350 and a credit to Accounts Receivable of $46,350.
• E) Debit to Cash of $45,000 and a credit to Notes Payable of $45,000.

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Definitions:

Risk-Free Rate

The anticipated financial gain from an investment devoid of any risk, frequently indicated by the yields of government bonds.

After-Tax Cost of Debt

The net cost of debt after accounting for the tax deductions available on interest payments.

Coupon

The interest rate on a bond that the issuer promises to pay to the holder until maturity, usually expressed as an annual percentage.

Tax Rate

The proportion of income, profits, or other bases that is paid or levied as tax by the government, typically expressed as a percentage.