If a retailer regularly sells its receivables to a factor the service charge of the factor should be classified as a(n)
A) selling expense.
B) interest expense.
C) other expense.
D) contra asset.

Question

Quizplus · Accepted Answer

Selling expenses include all direct and indirect costs associated with the selling process, including the service charge of a factor when a retailer sells its receivables. This is because factoring is often used as a means to accelerate cash flow and manage receivables, which are directly related to the sales process.

If a Retailer Regularly Sells Its Receivables to a Factor