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