Question

In: Accounting

On October 1, 2020, Sandhill, Inc. assigns $1,122,400 of its accounts receivable to Teal National Bank as

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

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Expert Solution

 

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

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