Question

4. (10 points)On March 1, 2014, Rasheed Company assigns $800,000 of its accounts receivable to the Third National Bank as collateral for a $500,000 loan due April 1, 2014. The assignment agreement calls for Rasheed 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 9% (a realistic rate of interest for a note of this type).a. Prepare the March 1, 2014, journal entry for Rasheed Company.b. Prepare the journal entry for Rasheed’s collection of $750,000 of the accounts receivable during March of 2014. No discounts, returns, or uncollectible accounts apply.c. On April 1, 2014, Rasheed paid Third National all that was due from the loan it secured on March 1, 2014. Prepare the journal entry to record this payment.

4. (10 points) On March 1, 2014, Rasheed Company assigns $800,000 of its accounts receivable to the Third National Bank as collateral for a $500,000 loan due April 1, 2014. The assignment agreement calls for Rasheed Company to continue to collect the receivables. Third National Bank assesses a finance charge of 3% of the accounts receivable, type) and interest on the loan is 9% (a realistic rate of interest fora note of this a. Prepare the March 1, 2014, journal entry for Rasheed Company. b. Prepare the journal entry for Rasheed's collection of $750,000 of the accounts receivable during March of 2014. accounts apply. c. On April 1, 2014, Rasheed paid Third National all that was due from the loan it secured on March 1, 2014. Prepare the journal entry to record this payment. No discounts, returns, or uncollectible Debit Credit Accounts а. b.

Answer 1

Rasheed Company Journal Enteries Trans. Particulars a. Cash a/c Dr. Finance charge a/c Dr. To Notes payable 800000 x 3% = 24000 Debit in $ Credit in $ 476000 24000 500000 b. 750000 Cash a/c Dr. To Accounts receivable (Debtors collection) 750000 C. 500000 3750 Notes payable a/c Dr. Interest expense a/c Dr. To Cash (Note Payable paid off) 500000 x 9% x 1/12 = 3750 503750

Answer 2

Journal Entries

Accounts	Debit ($)	Credit ($)
a) Cash	476,000
Finance charge (800,000*3%)	24,000
Loan payable		500,000
(Loan amount received)
Accounts Receivable Assigned	800,000
Accounts Receivable		800,000
(Assigning Accounts receivable)
b) Cash	750,000
Accounts Receivable Assigned		750,000
(Assigned AR collected)
c) Loan Payable	500,000
Interest expense (500,000*9%*1/12)	3,750
Cash		503,750
(Loan settled along with interest)