Town Home Company assigned $420,000 of its accounts receivable to Wargo Finance Company on August 1. Town
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Question:
Town Home Company assigned $420,000 of its accounts receivable to Wargo Finance Company on August 1. Town Home received 85% of the assigned accounts receivable less a service charge of 5% of the cash received. Town Home was also charged 14% interest annually on the outstanding loan balance. By August 31, Town Home had collected $276,000, and remitted this amount plus the interest to date on August 31 to Wargo Finance.
Required:
Prepare journal entries to record the above assignment transactions on Town Home.
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