A303 Name/Time: Homework Chapter7 PROBLEM On June 30, 20x1, the High Five Surfbo

ID: 2510070 • Letter: A

Question

A303 Name/Time: Homework Chapter7 PROBLEM On June 30, 20x1, the High Five Surfboard Company had outstanding accounts receivable of $600,000. On July 1, 20x1, the company borrowed $450,000 from the Equitable Finance Corporation and signed a promissory note. Interest at 10% is payable monthly. The company assigned specific receivables totaling S600,000 as collateral for the loan. Equitable Finance charges a finance fee equal to 1.8% of the accounts receivable assigned Required: Prepare the journal entry to record the borrowing on the books of High Five Surfboard 7| P age Spiceland 8 edition Page 7

Explanation / Answer

Journal Entry for Promissory Note

Promissory Note: It is a promissory note provided by the seller to the buyer. It is written document in which the buyer promises to pay certain sum of money at a particular future date. It is given by the seller to the buyer in case of a credit sale.

Entries will be as follows

Date

Particular

Debit

Credit

01-Jul

Cash Dr

$ 4,39,200.00

Finance Charges Dr

$ 10,800.00

Liability (Financing arrangement) Cr

$ 4,50,000.00

(Cash received by signing promissory notes)