Need help with accounting?

Answers:1   |   LastUpdateAt:2012-11-01 20:21:02  

Question
Tseday
Asked at 2012-08-13 21:47:02
The answer below is correct , but just does not make sense to me. Why not cash 202,300 debt , we are asking the company to borrow 202,300 . and why the finance charge is not 4046 ? Thanks

( Accounts Receivable Assignment)
On April 1, 2010 , the company allocated $ 427,100 Prince of accounts receivable at Third National Bank as collateral for a loan of $ 202,300 maturing on July 1, 2010 . The transfer agreement requires the company to continue the prince, to collect. Third National Bank assesses a finance charge of 2 % of accounts receivable and interest on the loan is 10 % ( a real rate of interest for a note of this type) .

( A) Prepare the April 1, 2010 , diary entry of the Prince's company .

Description / debit credit account

193,758 Cash
8542 Finance Charges
Notes payable 202.300
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