Question

Moon Inc. assigns $4,500,000 of its accounts receivables as collateral for a $3 million loan with a bank. The bank assesses a 3% finance charge on the loan amount and charges interest on the note at 6%. What would be the journal entry to record this transaction?

Answers: A. Debit Cash for $1,940,000, debit Interest Expense for $90,000, debit Due from Bank for $1,500,000, and credit Accounts Receivable for $4,500,000. B. Debit Cash for $2,730,000, debit Interest Expense for $270,000, and credit Notes Payable for $3,000,000. C. Debit Cash for $2,910,000, debit Interest Expense for $90,000, and credit Notes Payable for $3,000,000. D. Debit Cash for $2,910,000, debit Interest Expense for $90,000, and credit Accounts Receivable for $3,000,000. Please explain how you figured out the answer. Thank you.

Answer 1

Credit Answer: 0 No Accounts Title Debit Cash $ 29,10,000 Interest Expenses $ 90,000 Notes Payable $ 30,00,000