The Steven Co.sells $50, 000 of accounts receivable to a factor and receives 92% of the value of the factored accounts less a 10% commission based on the gross amount of factored accounts receivable.After the journal entry to record this factoring transaction is made, Steven Co.'s total assets will be

A) reduced by $4, 000
B) reduced by $5, 000
C) reduced by $9, 000
D) increased by $41, 000

Factored Accounts Receivable

The process of selling accounts receivable to a third party at a discount to quickly generate cash and reduce risk of non-payment.

Commission

A fee paid for services, usually a percentage of the total cost, to an agent or employee for facilitating or completing a sale.

Factoring Transaction

A financial transaction where a business sells its accounts receivable to a third party (the factor) at a discount.