I'm trying to understand why Blue Line Co. is "paying" EBC Co. receivables of 25,000. I'd appreciate it if someone can explain what the purpose of Receivables from Factor is when is it used and why it's important. Thank you!

Your company (EBC) will sell $500,000 of accounts receivable to Blue Line Factors on a without recourse basis. As part of the agreement, you will transfer the receivable records (sometimes referred to as the invoices) to Blue Line, which will receive the collections. Blue Line assesses a finance charge of 3% of the face amount of the accounts receivable and retains an amount equal to 5% of the accounts receivable (for probable adjustments for sales discounts, and sales returns and allowances). QUESTION What entry should EBC and Blue Line make to record this transaction? Your company (EBC) will sell $500,000 of accounts receivable to Blue Line Factors on a without recourse basis. As part of the agreement, you will transfer the receivable records (sometimes referred to as the invoices) to Blue Line, which will receive the collections. Blue Line assesses a finance charge of 3% of the face amount of the accounts receivable and retains an amount equal to 5% of the accounts receivable (for probable adjustments for sales discounts, and sales returns and allowances). QUESTION What entry should EBC and Blue Line make to record this transaction