Question

Assume on January 1, the Mesquite Corporation pledges the $200,000 receivables against a discounted note with...

Assume on January 1, the Mesquite Corporation pledges the $200,000 receivables against a discounted note with a face amount of $190,000. After the discount the company receives only $184,000 in cash from the bank in the transaction but must repay the face amount of the loan at its maturity date in six months. Prepare the journal entry to record the initial transaction and the repayment at maturity.

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Answer #2

Both the journal entries are provided below:

Date Accounts title Debit Credit
01-Jan Cash $        184,000.00
Discount on Notes Payable $             6,000.00
   Notes payable $      190,000.00
(Notes payable signed)
30 June [ after six months = maturity date] Notes Payable $        190,000.00
   Cash $      190,000.00
(Cash paid at maturity)
answered by: anonymous
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