Question

On April 1, 2020, Indigo Corporation assigns $490,000 of its accounts receivable to First National Bank as collateral for a $200,000 loan that is due July 1, 2020. The assignment agreement calls for Indigo to continue to collect the receivables. First National Bank assesses a finance charge of 4% of the accounts receivable, and interest on the loan is 8%, a realistic rate for a note of this type.

Prepare the April 1, 2020 journal entry for Indigo Corporation. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit

SHOW LIST OF ACCOUNTS

Prepare the journal entry for Indigo’s collection of $324,000 of the accounts receivable during the period April 1 to June 30, 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit

SHOW LIST OF ACCOUNTS

On July 1, 2020, Indigo paid First National Bank the entire amount that was due on the loan. Prepare the journal entry. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit

Answer 1

Event	Accounts titles and Explanation	Debit ($)	Credit ($)
(a)	Cash   - Bal. Fig.	$ 180,400
	Interest payable (or) Finance charge ($ 490,000 x 4% )	$ 19,600
	Notes payable		$ 200,000
	(To record theNote payable )
(b)	Cash	$ 324,000
	Accounts receivable		$ 324,000
	(To record the Accounts receivable )
(c )	Notes payable	$ 200,000
	Interest expense ( $ 200,000 x 8% x 3 /12 )	$ 4,000
	Cash		$ 204,000
	(To record the Payment )