Prepare the journal entry for somerss collection of 175000, Ask an Expert

Accounting

On April 1, 2012, Somers Company assigns $200,000 of its accounts receivable to Third National Bank as collateral for a $100,000 loan due July 1, 2012. The assignment agreement calls for Somers Company to continue to collect the receivables. Third National Bank assesses a finance charge of 3% of the accounts receivable, and interest on the loan is 8% (a realistic rate of interest for a note of this type).

Instructions:

(a) Prepare the April 1, 2012, journal entry for Somers Company.

(b) Prepare the journal entry for Somers's collection of $175,000 of the accounts receivable during the period from April 1, 2012, through June 30, 2012.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M960925

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