On April 1, 2012, Prince Company assigns $500,000 of its accounts receivable to the Third National Bank as collateral for a $300,000 loan due July 1, 2012. The assignment agreement calls for Prince Company to continue to collect the receivables. Third National Bank assesses a finance charge of 2% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type).
| (a) |
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Prepare the April 1, 2012, journal entry for Prince Company |
| (b) |
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Prepare the journal entry for Prince's collection of $350,000 of the accounts receivable during the period from April 1, 2012, through June 30, 2012. |
| (c) |
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On July 1, 2012, Prince paid Third National all that was due from the loan it secured on April 1, 2012. Prepare the journal entry to record this payment. |