Concord Furniture factors $893000 of receivables to Pharoah, Inc. Pharoah assesses a 3% service charge on the amount of receivables sold. Concord Furniture factors its receivables regularly with Pharoah. What journal entry does Concord make when factoring these receivables

For recording the factory receivable we simply debited cash and service charge expenses and credited accounts receivable.

Explanation:

The Journal Entry is shown below:-

Cash Dr, $860,210

Service charge expenses Dr, $26,790

To Accounts receivable $893,000

(Being factory receivable is recorded)

Working note

Service charge expenses = $893,000 * 3%

= $26,790

For recording the factory receivable we simply debited cash and service charge expenses and credited accounts receivable.