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)The loss section of the income statement will increase each time receivables are sold.
B)The credit to Accounts Receivable is less than the debit to Cash when the accounts are sold.
C)Operating expenses will increase each time accounts are sold.
D)The other expenses section of the income statement will increase each time accounts are sold.

Question

Quizplus · Accepted Answer

The service charge is considered an operating expense, so each time receivables are sold, operating expenses will increase.

A Company Regularly Sells Its Receivables to a Factor Who