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Belinda 125150469 OY E7-14. On April 1, 2015, Prince Company Assigns $500,000 of Its Accounts Receivable To The

Prince Company assigned $500,000 of its accounts receivable to Hibernia Bank as collateral for a $300,000 loan on April 1, 2015. Hibernia Bank charged a 2% finance fee on the receivables and the loan interest was 10%. Prince collected $350,000 of the receivables from April 1 to June 30, 2015. On July 1, 2015 Prince paid back the $300,000 loan plus interest to Hibernia Bank.

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668 views

Belinda 125150469 OY E7-14. On April 1, 2015, Prince Company Assigns $500,000 of Its Accounts Receivable To The

Prince Company assigned $500,000 of its accounts receivable to Hibernia Bank as collateral for a $300,000 loan on April 1, 2015. Hibernia Bank charged a 2% finance fee on the receivables and the loan interest was 10%. Prince collected $350,000 of the receivables from April 1 to June 30, 2015. On July 1, 2015 Prince paid back the $300,000 loan plus interest to Hibernia Bank.

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belinda
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Belinda

125150469
OY
E7-14. On April 1, 2015, Prince Company assigns $500,000 of its accounts receivable to the
Hibernia Bank as collateral for a $300,000 loan due July 1,2015 The assignment agreement calls
for Prince Company to continue to collect the receivables. Hibernia Bank assesses a finance
charge of 2% of the accounts receivables, and interest on the loan is 10%.
Instructions:
a.) Prepare the April 1,2015 journal entry for Prince Company.
b.) Prepare the journal entry for Princes collection of $350,000 of the accounts receivable
during the period from April 1,2015, through June 30,2015.
c.) On July 1,2015, Prince paid Hibernia all that was due from the loan it secured on April
1,2015. Prepare the journal entry to record this payment.
Jawaban:
EXERCISE 7-14

1. Cash................................................................... 18,000
Loss on Sale of Receivables
($20,000 X 10%) ............................................. 2,000
Accounts Receivable.............................. 20,000

2. Cash .................................................................. 50,600


Finance Charge ($55,000 X 8%) ...................... 4,400
Notes Payable ......................................... 55,000

3. Bad Debt Expense............................................ 5,850


Allowance for Doubtful Accounts
[($82,000 X 5%) + $1,750] .................... 5,850

4. Bad Debt Expense............................................ 6,450


Allowance for Doubtful Accounts
($430,000 X 1.5%) ................................. 6,450

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