Preparing Entries for A note payable was executed by

Last updated: 10/19/2023

Preparing Entries for A note payable was executed by Sterling Inc and sent to Miami Finance Company Sterling Inc used 240 000 of its accounts receivable as collateral for the loan The contract provided that Miami would advance 85 of the gross amount of the receivables Sterling Inc continues to collect payments for the receivables and the cash from customers is then remitted to the finance company The cash remitted is first applied to the finance charges with the remainder applied to principal During the first month customers owing 164 000 paid cash less sales returns and allowances of 6 400 originally recorded as a refund liability The finance charge at the end of the first month was 1 400 During the second month the remaining receivables were collected in full except for 1 600 written off as uncollectible Final settlement was effected with the finance company including payment of an additional finance charge of 600 Required a Record the entry for Sterling to record the secured borrowing b Record the first month entries for Sterling to record 1 the collections and 2 the payment to Miami c Record the entries for Sterling to record 1 the collections for the second month and 2 the final payment to Miami a Cash C b Cash Note Payable To record the secured borrowing Refund Liability Account Name Accounts Receivable To record collection on receivables for first month Interest Expense Note Payable Cash To record payment to Miami for the first month Cash C V v V Allowance for Doubtful Accounts Accounts Receivable To record collection on receivables for second month Kerung Liability V Interest Expense Note Payable Dr 204 000 157 600 400 0 1 400 156 200 0 600 155 400 Cr 0 204 000 0 0 164 000 0 0 157 600 0x 0x 156 000 x Accounts Receivable To record collection on receivables for first month Interest Expense Note Payable Cash To record payment to Miami for the first month Cash Allowance for Doubtful Accounts Accounts Receivable To record collection on receivables for second month P Cash To record payment final payment to Miami 6 400 0 1 400 156 200 600 155 400 0 600 155 400 0 0 164 000 0 0 157 600 0x 0x 156 000 x 0 0x 156 000 X