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Intermediate Accounting: Reporting...
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Intermediate Accounting: Reporting...
On December 1 of the current year, Jordan Inc. assigns $125,000 of its accounts receivable to McLaughlin Company for cash. McLaughlin Company charges a $750 service fee, advances 85% of Jordan’s accounts receivable, and charges an annual interest rate of 9% on any outstanding loan balance. Prepare the related journal entries for Jordan.
Prepare journal entry to record the given transaction.
Account receivable:
The amount of money to be received by a company for the sale of goods and services to the customers is referred to as account receivable.
Prepare journal entry to record the given transaction.
| Date | Account Titles and explanation | Debit ($) | Credit ($) |
| December 1 | Cash (1) | 105,500 |  |
| Â | Assignment service charge expense | 750 | Â |
| Â | Â Â Â Â Notes payable | Â | 106,250 |
|  | (To record transfer of accounts receivable) |  |  |
Table (1)
- Cash is an asset and there is an increase in the value of an asset. Hence, debit the cash by $105,500.
- Assignment service charge expense is a component of stockholder’s equity and there is an increase in the value of expense. Hence, debit the assignment service charge expense by $750.
- Notes payable is a liability and there is an increase in the value of liability. Hence, credit the notes payable by $106,250
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