On april 1 2014 somers company assigns 200000 of its

Reference no: EM13392798

On April 1, 2014, Somers Company assigns $200,000 of its accounts receivable 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 accounts receivable, 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 accounts receivable during the period from April 1, 2014, through June 30, 2014.

Reference no: EM13392798

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