Ask Me Help Desk - Accured Interest On The Note

On September 1, Riva Co. assigns specific receivables totaling $750,000 to Pacific Bank as collateral on a $625,000, 12 percent note. Riva Co. will continue to collect the assigned accounts receivable. Pacific also assesses a 2 percent service charge on the total accounts receivable assigned. Riva Co. is to make monthly payments to Pacific with cash collected on assigned accounts receivable. Collections of assigned accounts during September totaled $260,000 less cash discounts of $3,500. What amount is owed to Pacific by Riva Co. for September collections plus accrued interest on the note to September 30? This is my working: Please tell me where I am going wrong. :confused:

September 1
Debit Bank (98%) 260,000-3,500 = $256,500
Debit Finance charges (2%) 256,500*.02 = 5,130$
Credit Pacific Bank (100%)256,500+5,130 = 261,630 $
To record funds provided by bank
Debit Accounts receivable assigned = $256,500
Credit accounts receivable = $256,500

September 30
Debit Cash $5,130+6,250 (interest expense) = 11,380
Debit Discount allowed = $3,500
Credit accounts receivable assigned = $256,500
Debit Interest expense (1%) = $6,250
Debit Pacific Bank (99%) $261,630-6,250 = 255,380
Credit Cash = $11,380

Quote:

Peachey;1851117]On September 1, Riva Co. assigns specific receivables totaling $750,000 to Pacific Bank as collateral on a $625,000, 12 percent note. Riva Co. will continue to collect the assigned accounts receivable. Pacific also assesses a 2 percent service charge on the total accounts receivable assigned. Riva Co. is to make monthly payments to Pacific with cash collected on assigned accounts receivable. Collections of assigned accounts during September totaled $260,000 less cash discounts of $3,500. What amount is owed to Pacific by Riva Co. for September collections plus accrued interest on the note to September 30?

Quote:

B]This is my working:[/B] Please tell me where i am going wrong. :confused:

September 1
Debit Bank (98%) 260,000-3,500 = $256,500
Debit Finance charges (2%) 256,500*.02 = 5,130$
Credit Pacific Bank (100%)256,500+5,130 = 261,630 $
To record funds provided by bank
Debit Accounts receivable assigned = $256,500
Credit accounts receivable = $256,500

You have missed the first entry on September 1 to record the assignment of receivables
Debit Accounts receivable assigned $750,000
Credit Accounts receivable $750,000

Debit Bank $610,000
Debit Finance charges $15,000 - ($750,000 x 2%)
Credit Pacific Bank $625,000
To record the funds received from Pacific Bank

Quote:

September 30
Debit Cash $5,130+6,250 (interest expense) = 11,380
Debit Discount allowed = $3,500
Credit accounts receivable assigned = $256,500
Debit Interest expense (1%) = $6,250
Debit Pacific Bank (99%) $261,630-6,250 = 255,380
Credit Cash = $11,380

Compare with the following:
Debit Cash 256,500
Debit discounts allowed 3,500
Credit Accounts receivable assigned 260,000

Debit Interest expense 3,685
Debit Pacific Bank 252,815
Credit Cash 256,500

OK but I am stuck at Debit Interest expense (1%) I don't know what to calculate: and what is owed to the bank for sept collection plus accrued interest on the note to sept. 30.