On december 1, 2013, Colonel Wilder borrowed $400,000 at 12% interest and pledge
ID: 2381728 • Letter: O
Question
On december 1, 2013, Colonel Wilder borrowed $400,000 at 12% interest and pledged $500,000 in accounts receivable as collateral. Additionally, Colonel Wilder was charged a finace fee equals to 1% of the accounts receivable assigned. At the end of December, $300,000 of the assigned receivables were collected and remitted to the lender along with accured interest.
Required:
Prepare journal entries to record the borrowing, the assignment of receivables, the collection on the receivables, and the recognition of interest expense.
Explanation / Answer
Debit Cash $395,000
Debit Finance Fee $5,000
Credit Loan Payable $400,000
Debit Accounts Receivable $500,000
Credit Accounts Receivable Assigned $500,000
Debit Cash $300,000
Credit A/R $300,000
Debit Interest Expense $48,000
Credit Interest Payable $48,000
Debit Interest Payable $48,000
Credit Cash $48,000
Debit Loan Payable $300,000
Credit Cash $300,000
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