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Unformatted text preview: the arrangement. Citizens Bank assesses a finance charge of 1 percent of the A/R (immediately) and interest on the note at 12 percent. Howat makes monthly payments to the bank for cash it collects on the A/R. See Illus. 7­15 on next slide for JEs. Chapter 7-54 LO 8 Explain accounting issues related to disposition LO of accounts and notes receivable. of Secured Borrowing (PLEDGING) Secured Borrowing ((PLEDGING) PLEDGING) Secured Secured (PLEDGING) Illustration 7-15 Chapter 7-55 LO 8 Explain accounting issues related to disposition LO of accounts and notes receivable. of Secured Borrowing (PLEDGING) Secured Borrowing ((PLEDGING) PLEDGING) Secured Secured (PLEDGING) E7-13: On April 1, 2010, Prince Company assigns $500,000 of its A/R to the Third National Bank as collateral for a $300,000 loan due July 1, 2010. The agreement calls for Prince Company to continue to collect the A/R. Third National Bank assesses a finance charge of 2% of the pledged A/R (paid immediately) and interest on the loan of 10% (realistic for interest...
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