A company regularly sells its receivables to a factor who assesses a 2% service

Question

A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables?



a. Selling expenses will increase each time accounts are sold.



b. The other expense section of the income statement will increase each time accounts are sold.



c. The loss section of the income statement will increase each time receivables are sold.



d. The credit to Accounts Receivable is less than the debit to Cash when the accounts are sold.

Explanation / Answer

The other expense section of the income statement will increase each time accounts are sold.

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