This question has been answered by Expert on Feb 6, 2012. View Solution
posted a question
E7-13B(Assigning Accounts Receivable) 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).
(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.
(c) On July 1, 2012, Somers paid Third National all that was due from the loan it secured on April 1, 2012.
Expert answered the question
Dear Student,
Please...  View Full Answer

Download Preview:



DR ($)

1 April

Finance Charge- Dr
To Loan payable
(Being secured loan procured by paying
finance charges)


1 April