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  • Oct 21, 2009, 11:25 AM
    Journalizing various receivable transactions
    Specific accounts receivable of $9,000 (gross) are pledged to Rather Credit Corp. as security for a loan of $6,000 at a finance charge of 6% of the amount of the loan. The finance company will make the collections. (All the accounts receivable are past the discount period.)
  • Oct 22, 2009, 09:59 PM

    On receiving loan from bank

    Debit Cash $6,000
    Credit Short term loan $6,000

    When the bank collects the receivables, it will adjust the principal and interest from the collections and refund the balance to the company.

    The interest charge is 6% and assuming it to be an annual rate and that the receivables are collected in 3 months, the finance company will make a net payment of $2,910. The entry will beL

    Bank/Cash 2,910
    Interest charge 90
    Short term loan 6,000
    Accounts receivable 9,000

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