On December 1, 2016, General Mole borrowed $320,000 at 12% interest and pledged
ID: 2528079 • Letter: O
Question
On December 1, 2016, General Mole borrowed $320,000 at 12% interest and pledged $420,000 in accounts receivable as collateral. Additionally, General Mole was charged a finance fee equal to 1% of the accounts receivable assigned. At the end of December, $220,000 of the assigned receivables were collected and remitted to the lender along with accrued interest.
Prepare journal entries to record the borrowing, the assignment of receivables, the collection on the receivables, and the recognition of interest expense. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
On December 1, 2016, General Mole borrowed $320,000 at 12% interest and pledged $420,000 in accounts receivable as collateral. Additionally, General Mole was charged a finance fee equal to 1% of the accounts receivable assigned. At the end of December, $220,000 of the assigned receivables were collected and remitted to the lender along with accrued interest.
Explanation / Answer
Note: There will be no entry in the books of accounts on assignement of receivables, instead a disclosure will be given in the financial statements for such assignment
S.No Date Particulars Debit Credit 1 1 Dec 2016 Cash 320,000 12% Borrowing 320,000 (Being 12% borrowing taken) 2 1 Dec 2016 Finance Fees 3,200 Cash 3,200 (Being 1% of 320,000 paid as finance fees) 3 31 Dec 2016 Cash 220,000 Receivables 220,000 (Being cash collected against receivables) 4 31 Dec 2016 Interest on borrowing 38,400 Interest accrued on 12% borrowing 38,400 (Being interest accrued on 12% of 320,000)Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.