On October 1, 2017, Desert Co. assigns $2,000,000 of its accounts receivable to Arizona National Bank...
On October 1, 2017, Desert Co. assigns $2,000,000 of its accounts receivable to Arizona National Bank as collateral for a $1,500,000 note. The bank assesses a finance charge of 2% of the receivables assigned and interest on the note of 7%.
From the perspective of Desert, Co.:
(1) What is the amount of cash inflow Desert receives from this transaction?
(2) What amount of Interest Expense would Desert recognize?
Homework Answers
1) Amount of cash inflow desert received from this transaction = $1500000
2) Amount of interest expense = 2000000*7% = $140000
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(If...
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