On June 30, 2021, the High Five Surfboard Company had outstanding accounts receivable of $800,000. On July 1, 2021, the company borrowed $650,000 from the Equitable Finance Corporation and signed a promissory note. Interest at 10% is payable monthly. The
On June 30, 2021, the High Five Surfboard Company had outstanding accounts receivable of $800,000. On July 1, 2021, the company borrowed $650,000 from the Equitable Finance Corporation and signed a promissory note. Interest at 10% is payable monthly. The company assigned specific receivables totaling $800,000 as collateral for the loan. Equitable Finance charges a finance fee equal to 1.2% of the accounts receivable assigned.
Required:
Prepare the journal entry to record the borrowing on the books of High Five Surfboard. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Homework Answers
step 1) 650,000*1.2%= 9,600
step 2) 650,000-9,600= 640,400
dr. cash 640,400
dr. finance charge expense 9,600
cr. liability-financing arrangement 650,000
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