Question: On March 1, 2014, Rasheed Company assigns $800,000 of its accounts receivable to the Third National Bank as collateral for a $500,000 loan due July 1, 2014. The assignment agreement calls for Rasheed Company to continue to collect the receivables. Third National Bank assesses a finance charge of 3.5% of the accounts receivable, and interest on the loan is 9% (a realistic rate of interest for a note of this type).
Prepare the March 1, 2014, journal entry for Rasheed Company.
Prepare the journal entry for Rasheed's collection of $775,000 of the accounts receivable during the period from March 1, 2014, through June 30, 2014.
On July 1, 2014, Rasheed paid Third National all that was due from the loan it secured on March 1, 2014. Prepare the journal entry to record this payment.