Prepare journal entries in the books of Fortune Company

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Problem - Fortune Company completed the following selected transactions during 2020:

Oct. 1 Assigned accounts of P2,000,000 to Ayala Bank under a notification basis. Ayala Bank made an advance of 75% and deducted a 6% finance charge based on the amount advanced.

Oct. 31 Received notice from Ayala Bank that P1,000,000 assigned accounts had been collected, and that Ayala charged Fortune 12% interest. The collection is applied first to interest, and the balance is applied to principal repayment.

Nov. 30 Received notice from Ayala Bank that P800,000 had been collected. Ayala remitted to Fortune the amount due to the latter, after deducting 12% interest on the loan balance.

Required - Prepare journal entries in the books of Fortune Company to record the foregoing transactions.

Reference no: EM132829173

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