Accounts receivable in the amount of $460,000 were assigned to the Fast Finance

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)

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