On April 1, 2014, Patel Company assigns $510,600 of its accounts receivable to t

Question

On April 1, 2014, Patel Company assigns $510,600 of its accounts receivable to the Third National Bank as collateral for a $323,000 loan due July 1, 2014. The assignment agreement calls for Patel Company to continue to collect the receivables. Third National Bank assesses a finance charge of 4% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type).

Prepare the April 1, 2014, journal entry for Patel Company. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

Date

Account Titles and Explanation

Debit

Credit

Explanation / Answer

April 1, 2014:    Assaigned accounts receivable    490,176

                       Finance Charges                           20,424

                           To Accounts receivable                          510,600

                  (being accounts receivable transfered to assaigned accounts)

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