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Accounts receivable in the amount of $790,000 were assigned to the Fast Finance Company by Marsh,...

Question:

Accounts receivable in the amount of $790,000 were assigned to the Fast Finance Company by Marsh, Inc., as security for a loan of $690,000. The finance company charged a 8% commission on the face amount of the loan, and the note bears interest at 4% per year.

During the first month, Marsh collected $420,000 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

Accounts Receivable:

Accounts receivable refers to a claim, which is legally enforced for the payment, which is held by the business for the supply of goods and services which have been ordered by the customers or clients and that are delivered in order to receive the payment with a specified time.

Answer and Explanation:

Date Particulars Debit($) Credit($)
Cash A/c                                                                                                        Dr. 6,26,800
Commission A/c                                                                                        Dr. 63,200
To Notes payable A/c 6,90,000
Cash A/c                                                                                                        Dr. 4,20,000
To accounts receivable A/c 4,20,000
Notes Payable A/c                                                                                    Dr. 4,20,000
Interest expense A/c                                                                               Dr. 2933
To Cash A/c 4,22,933


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Accounts Receivable Journal Entries

from Financial Accounting: Homework Help Resource

Chapter 3 / Lesson 20
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