Question

Vaughn Manufacturing assigned $1606000 of accounts receivable to Cullumber Company as security for a loan of $1342000. Cullumber charged a 3% commission on the amount of the loan; the interest rate on the note was 11%. During the first month, Vaughn collected $459000 on assigned accounts after deducting $1550 of discounts. Vaughn accepted returns worth $5300 and wrote off assigned accounts totaling $11880. Entries during the first month would include a

Answer 1

Entries during the first month would include the following:

Account Title Debit Credit

Interest Expenses $40,260

(1342000*3%)

Kwik $40,260

Cash $459,000

Discount $1,550

Account Receivable $460,550

Sales Return $5,300

Account Receivable $5,300

Allowances for Doubtful Debt $$11,880

Account Receivable $$11,880