Essay
In order to resolve its cash flow problems, Town Home Company assigned $420,000 of its accounts receivable to Wargo Finance Company on August 1. Town Home received 85% of the assigned accounts receivable less a service charge of 5% of the cash received. Town Home was also charged 14% interest annually on the outstanding loan balance. By August 31, Town Home had collected $276,000, and remitted this amount plus the interest to date on August 31 to Wargo Finance.
Required:
a. Prepare journal entries to record the above assignment transactions on Town Home's books.
b. If Town Home collected an additional $50,000 on outstanding accounts and remitted this to Wargo Finance on September 30, how much additional interest must be paid on September 30?
Correct Answer:
Verified
Correct Answer:
Verified
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