Accounts receivable in the amount of $770,000 were assigned to the Fast Finance

Question

Accounts receivable in the amount of $770,000 were assigned to the Fast Finance Company by Marsh, Inc., as security for a loan of $400,000. The finance company assessed a 2% finance charge on the face amount of the loan, and the note bears interest at 8% per year. During the first month, Marsh collected $270,000 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. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.) Account Titles and Explanation Debit Credit

Explanation / Answer

Solution:

Debit Credit Cash 384,600 Finance Charge 15400 Notes payable 400,000 (770,000 * 2%) Cash 270,000 Accounts receivable 270,000 Notes payable 270,000 Interest expense 2933 Cash 272933 (440,000*8%*1/12)

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