Exercise 7-15 On April 1, 2017, Swifty Company assigns $501,500 of its accounts

Question

Exercise 7-15 On April 1, 2017, Swifty Company assigns $501,500 of its accounts receivable to the Third National Bank as collateral for a $318,000 loan due July 1, 2017. The assignment agreement calls for Swifty 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, 2017, journal entry for Swifty 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 Apr. 1, 2017 SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare the journal entry for Swifty's collection of $376,000 of the accounts receivable during the period from April 1, 2017, through June 30, 2017. (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.)

Explanation / Answer

a-

Apr.1,2017 debit: Cash. 297,940

Debit: Finance charge. 20,060

Credit: Notes payable. 318,000

(501,500*4%=20,060)

b)

Debit: Cash. 376,000

Credit: Accounts payable. 376,000

c)

Debit: Notes payable. 318,000

Debit:Interest expenses. 7,950

Credit: Cash. 325,95: (318,000*10%*3/12)

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