Using the information provided in BE 9- 15, assume that during the first month after the financing is completed, Kitt collects $ 250,000 of the assigned accounts receivable. Kitt remits this amount to Neville Capital along with the payment of one month’s interest. Prepare the journal entries to record the cash collection on the receivables and payment to Neville.
In be9-15
Kitt Company borrows $ 800,000 from Neville Capital by issuing an 8- year (96- month), 12% note payable. Interest is due and payable each month based on the outstanding balance at the beginning of the month. Kitt assigns $ 850,000 of its accounts receivable as collateral for the lending arrangement. Prepare the journal entries to record the financing arrangement on Kitt’s books.