Question

On October 1, 2017, Waterway, Inc. assigns $1,160,700 of its accounts receivable to Wildhorse National Bank as collateral for a $747,900 note. The bank assesses a finance charge of 3% of the receivables assigned and interest on the note of 9%. Prepare the October 1 journal entries for both Waterway and Wildhorse.

Answer 1

Waterway, Inc.

General Journal Debit Credit

Cash $713,079

Interest Expense ($1,160,700 * 3%) $34,821

Notes Payable $747,900

Wildhorse National Bank

General Journal Debit Credit

Notes Receivable $747,900

Cash $713,079

Interest Revenue ($1,160,700 * 3%) $34,821