Accounts receivable in the amount of $460,000 were assigned to the Fast Finance
ID: 2425482 • Letter: A
Question
Accounts receivable in the amount of $460,000 were assigned to the Fast Finance Company by Marsh, Inc., as security for a loan of $620,000. The finance company charged a 4% commission on the face amount of the loan, and the note bears interest at 8% per year. During the first month, Marsh collected $280,000 on assigned accounts. This amount was remitted to the finance company along with one month's interest on the note. 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
Ans-
In the book of Marsh Inc. jounal entries.
Account receivable A/c Dr $460000
Fast Finance Company A/c Dr $160000
To Loan A/c $620000
Commission payable A/c Dr %24800
To Fast Finance Company A/c $24800
Cash A/c Dr $280000
To account receivable A/c $280000
(being amount collected on assigned accounts)
Fast Finance Company A/c Dr $284133
TO bank A/c $284133
(being amount remittance to finance co. along with interest on loan @ 8% for 1 month)