In order to resolve its cash flow problems, Town Home Company assigned $420,000 of its accounts receivable to Wargo Finance Company on August 1. Town Home received 85% of the assigned accounts receivable less a service charge of 5% of the cash received. Town Home was also charged 14% interest annually on the outstanding loan balance. By August 31, Town Home had collected $276,000, and remitted this amount plus the interest to date on August 31 to Wargo Finance.
Required:
a. Prepare journal entries to record the above assignment transactions on Town Home's books.
b. If Town Home collected an additional $50,000 on outstanding accounts and remitted this to Wargo Finance on September 30, how much additional interest must be paid on September 30?

Question

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The Answer of In order to resolve its cash flow problems, Town Home Company assigned $420,000 of its accounts receivable to Wargo Finance Company on August 1. Town Home received 85% of the assigned accounts receivable less a service charge of 5% of the cash received. Town Home was also charged 14% interest annually on the outstanding loan balance. By August 31, Town Home had collected $276,000, and remitted this amount plus the interest to date on August 31 to Wargo Finance.
Required:
a. Prepare journal entries to record the above assignment transactions on Town Home's books.
b. If Town Home collected an additional $50,000 on outstanding accounts and remitted this to Wargo Finance on September 30, how much additional interest must be paid on September 30?

In Order to Resolve Its Cash Flow Problems, Town Home