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DO IT! 2b Factoring Peter M. Kell Wholesalers Co. needs to raise $120,000 in cash to safely cover next Friday's em ployee payroll. Kell has
DO IT! 2b Factoring Peter M. Kell Wholesalers Co. needs to raise $120,000 in cash to safely cover next Friday's em ployee payroll. Kell has reached its debt ceiling. Kell's present balance of outstanding receivables totals $750,000. Kell decides to factor $125,000 of its receivables on September 7, 2020, to alleviate this cash crunch. Record the entry that kell would make when it raises the needed cash. (Assume a 1% service charge.) ACTION PLAN Consider sale of receivables to a factor. Weigh cost of factoring, against benefit of having cash in hand. Solution Assuming that Kell Co. factors $125,000 of its accounts receivabl e al al service charge, it would make this entry Sept. 7 Cash 23,750 Service Charge Expense (1% X S125,000) Accounts Receivable (To record sale of receivables to factor) 1.250 Related exercise material: BE9.7, DO IT! 9.2b, E9.9, E9.10, and E9.11 receivable 32ng Accounts anies and Receivable Valuing accounts receivable Disposing of accounts receivable DO IT! 2a Bad Debt Expense 2b Factoring ies Valuing accounts receivable Disposing of accounts receivable DO IT! 2a Bad Debt Expense 2b Factoring
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