Problem
Prepare journal entries for Chapman Co. for:
(a) Accounts receivable in the amount of $600,000 were assigned to Varano Finance Co. by Chapman as security for a loan of $575,000. Varano charged a 4% commission on the accounts; the interest rate on the note is 8%.
(b) During the first month, Chapman collected $350,000 on assigned accounts after deducting $575 of discounts. Chapman wrote off a $1,500 assigned account.
(c) The amount Chapman paid to Varano (including one month's interest on the note) at the end of the first month.