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On April 1, 2014, Prince Company assigns $500,000 of its accounts receivable to the Third National Bank as collateral for a $300,000 loan due July 1, 2014. The assignment agreement calls for Prince Company to continue to collect the receivables. Third National Bank assesses a finance charge of 2% of the accounts receivable, and interest on the loan is 10% per annum (a realistic rate of interest for a note of this type). (a) Prepare the April 1, 2012, journal entry for Prince Company

(b) Prepare the journal entry for Prince

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  1. Today, 21:04
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    The journal entries are shown below:

    a) April 1, 2012;

    Dr Cash A/C. $290,000

    Dr finance charge $10,000

    Cr payable $300,000

    ($500,000 * 2% = $10,000)

    b)

    Dr Cash A/c $350,000

    Cr Account receivable $350,000

    c)

    Dr payable $300,000

    Dr interest expense $7,500

    Cr Cash $307,500

    (10% * $300,000 * 3/12 = $7,500)
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Home » Business » On April 1, 2014, Prince Company assigns $500,000 of its accounts receivable to the Third National Bank as collateral for a $300,000 loan due July 1, 2014. The assignment agreement calls for Prince Company to continue to collect the receivables.
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