On October 1, 2017, Chung, Inc. assigns $1,000,000 of its accounts receivable to Seneca National Bank as collateral for a $750,000 note. The bank assesses a finance charge of 2% of the receivables assigned and interest on the note of 9%.

Prepare the October 1 journal entries for both Chung and Seneca. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. C

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Valencia

Business

25 August, 11:53

On October 1, 2017, Chung, Inc. assigns $1,000,000 of its accounts receivable to Seneca National Bank as collateral for a $750,000 note. The bank assesses a finance charge of 2% of the receivables assigned and interest on the note of 9%.

Prepare the October 1 journal entries for both Chung and Seneca. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. C

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Johanna Martin · Answer 1

The journal entries are shown below:

For Chung Inc

Cash A/c Dr $710,000

Interest expense A/c Dr $40,000 ($1,000,000 * 4%)

To Notes payable A/c $750,000

(Being note is issued for cash and interest)

For Seneca National Bank

Notes Receivable A/c Dr $750,000

To Cash A/c $710,000

To Interest Revenue $40,000

(Being note is received and interest is earned)