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Docile Company Requirement: Prepare Journal Entries Debit Credit

Docile Company assigned $1.5 million of accounts receivable to a bank in exchange for cash of $1,125,000 less a $60,000 service charge on July 1. In August, $800,000 more of accounts receivable was assigned and $22,500 of interest expense was paid. On September 1, $500,000 of assigned accounts receivable was collected, $325,000 was paid to the bank to pay down the loan, $6,500 of interest was paid, and $168,500 of excess cash was received.

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2K views1 page

Docile Company Requirement: Prepare Journal Entries Debit Credit

Docile Company assigned $1.5 million of accounts receivable to a bank in exchange for cash of $1,125,000 less a $60,000 service charge on July 1. In August, $800,000 more of accounts receivable was assigned and $22,500 of interest expense was paid. On September 1, $500,000 of assigned accounts receivable was collected, $325,000 was paid to the bank to pay down the loan, $6,500 of interest was paid, and $168,500 of excess cash was received.

Uploaded by

Anonn
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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Docile Company

Requirement: Prepare journal entries Debit Credit

Jul-01 Accounts receivable - assigned 1,500,000


Accounts receivable 1,500,000

1 Cash (1,125,000 - 60,000) 1,065,000


Service charge (4%*1.5m) 60,000
Notes payable - bank 1,125,000

Aug-01 Notes payable - bank 800,000


Accounts receivable - assigned 800,000

1 Interest expense (2%*1,125,000) 22,500


Cash 22,500

Sep-01 Cash 168,500


Interest expense 6,500
Notes payable - bank 325,000
Accounts receivable - assigned 500,000

Accounts receivable 200,000


Accounts receivable - assigned 200,000

Computation of cash on Sept1

Collection by bank 500,000


Less: Payment of loan (1,125,000-800k) 325,000
Excess collection 175,000
Less: Interest (2%*325,000) 6,500
Cash remittance from bank 168,500

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