Question

(TCO B) Adjusting entries: On April 1, 201X, Jokers Company assigns $600,000 of its accounts receivable to the First National Bank as collateral for a $300,000 loan due July 1, 201X. The assignment agreement calls for Jokers Company to continue to collect the receivables. First National Bank assesses a finance charge of 2% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type). Prepare the journal entry for Joker’s collection of $450,000 of the accounts receivable during the period from April 1, 201X through June 30, 201X. You are to prepare the missing adjusting entry. For each journal entry write DR for debit and CR for credit.

Answer 1

Answer:-

Date	Particular	Dr($)	Cr($)
1	Cash A/C                                          -------------- Dr	2,88,000
	Finance Charges A/C                     -------------- Dr	12,000
	To Notes Payables A/C		300,000
	($600,000*2%=$12,000)
2.	Cash A/C                                         -------------- Dr	450,000
	To Accounts Receivable A/C		450,000
3	Notes Payable                               -------------- Dr	300,000
	Interest Expense                           -------------- Dr	7,500
	To cash A/C		307,500
	($300,000*10%*3/12=$ 7,500)