On April 1, 2014, Somers Company assigns $200,000 of its accounts receivable to Third National Bank as

Question:

On April 1, 2014, Somers Company assigns $200,000 of its to Third National Bank as collateral for a $100,000 loan due July 1, 2014. The assignment agreement calls for Somers Company to continue to collect the receivables. Third National Bank assesses a finance charge of 3% of the and interest on the loan is 8% (a realistic rate of interest for a note of this type).

Instructions
(a) Prepare the April 1, 2014, journal entry for Somers Company.
(b) Prepare the journal entry for Somers’s collection of $175,000 of the during the period from April 1, 2014, through June 30, 2014.
(c) On July 1, 2014, Somers paid Third National all that was due from the loan it secured on April 1, 2014.

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...