Question

On October 1, 2020, Novak, Inc. assigns $1,024,200 of its accounts receivable to Splish National Bank as collateral for a $747,800 note. The bank assesses a finance charge of 2% of the receivables assigned and interest on the note of 8%.

Prepare the October 1 journal entries for both Novak and Splish. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
	Novak, Inc.
Oct. 1
	Splish National Bank
Oct. 1

Answer 1

Date	Account Titles and Explanation	Debit	Credit
	Novak, Inc.
Oct. 1	Cash    ( $ 747,800 (-) $ 20,484 )	$ 727,316
	Interest Expense ( $ 1,024,200 x 2% )	$ 20,484
	Notes Payable		$ 747,800
	(To record the Notes Payable )
	Splish National Bank
Oct. 1	Notes Receivable	$ 747,800
	Cash		$ 727,316
	Interest Revenue		$ 20,484
	(To record the Notes Receivable )