In: Accounting
On October 1, 2020, Sandhill, Inc. assigns $1,122,400 of its accounts receivable to Teal National Bank as collateral for a $719,700 note. The bank assesses a finance charge of 3% of the receivables assigned and interest on the note of 10%. Prepare the October 1 journal entries for both Sandhill and Teal
In the books of Sandhil
Date | Accounts title and explanation | Debit | Credit |
1-Oct | Cash | $ 686,028 | |
Finance charges or (Interest expense) (1,122,400*3%) | $ 33,672 | ||
Notes payable | $ 719,700 | ||
[ To record loan ] |
In the books of Teal; national bank
1-Oct | Notes receivable | $ 719,700 | |
cash | $ 686,028 | ||
Interest revenue | $ 33,672 | ||
[ To record loan ] |
Date | Accounts title and explanation | Debit | Credit |
1-Oct | Cash | $ 686,028 | |
Finance charges or (Interest expense) (1,122,400*3%) | $ 33,672 | ||
Notes payable | $ 719,700 |