Prepare the April 1, 2014, journal entry for Rasheed Company. On April 1, 2014,

Question

Prepare the April 1, 2014, journal entry for Rasheed Company.

On April 1, 2014, Rasheed Company assigns $540,400 of its accounts receivable to the Third National Bank as collateral for a $346,000 loan due July 1, 2014. The assignment agreement calls for Rasheed Company to continue to collect the receivables. Third National Bank assesses a finance charge of 2% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type).
On April 1, 2014, Rasheed Company assigns $540,400 of its accounts receivable to the Third National Bank as collateral for a $346,000 loan due July 1, 2014. The assignment agreement calls for Rasheed Company to continue to collect the receivables. Third National Bank assesses a finance charge of 2% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type). Prepare the April 1, 2014, journal entry for Rasheed Company.

Explanation / Answer

Date Account Titles and Explanation Debit Credit Date Account Titles and Explanation Debit Credit 01-Apr-14 Bank a/c $346,000 Financing charges $10,808 Interest on loan $183,592 To Accounts receivable $540,400

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