Accounts receivable in the amount of $500.000 were assigned to the Fast Finance

Question

Accounts receivable in the amount of $500.000 were assigned to the Fast Finance Company by Marsh, Inc., as security for a lona of $400,000. The finance company assessed a 4% finance charge on the face amount of the loan, and the note bears interest at 9% per year. During the first month, Marsh collected $260,000 on assigned accounts. The amount was remitted to the finance company along with one month's interest on the note. Instructions Make all the entries for Marsh Inc. associated with the transfer of the accounts receivable, the loan, and the remittance to the finance company.

Explanation / Answer

The loan taken by Marsh in the form of Notes payable is bearing 9% interets per year.

Loan amount is $400,000. Interest on $400,000 for one month is = $400,000*9%*1/12= $3,000

That is the calculation for interest

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