Accured Interest

[Janelle101]

On September 1, Riva Co. assigns specific receivables totaling $750,000 to Pacific Bank as collateral on a $625,000, 12 percent note. Riva Co. will continue to collect the assigned accounts receivable. Pacific also assesses a 2 percent service charge on the total accounts receivable assigned. Riva Co. is to make monthly payments to Pacific with cash collected on assigned accounts receivable. Collections of assigned accounts during September totaled $260,000 less cash discounts of $3,500. What amount is owed to Pacific by Riva Co. for September collections plus accrued interest on the note to September 30?

September 1...........................................................September 30
Debit Bank (98%)…………………………....... Debit Cash……………………………….
Debit Finance charges (2%)……………….... Debit Discount allowed………………….
Credit Pacific Bank (100%)………………..... Credit accounts receivable assigned…….
To record funds provided by bank………… Debit Interest expense (1%)…………….

Debit Accounts receivable assigned………. Debit Pacific Bank (99%)………………
Credit accounts receivable…………………... Credit Cash……………………………

I've reach as far as here and cant go any further i dont know what to calculate. Please Help.

 

[Denis]

What's this: a financial problem, or an accounting problem? :shock:

This is a summary of "cash" to be remitted to Pacific Bank for September:

750000 * .02 = 15,000 (2% of account receivable)
260000-3500 = 256,500 (net collected)
625000 * .01 = 6,250 (interest on note for Sept)
====================
total = 277,750

If you can't clarify what goes on (like is the 2% (which is $15,000) a constant monthly fee?)
then I can't go any further...maybe someone else will :idea:

 

[Janelle101]

I really tried but this is as far as i can reach, can anyone help me and tell me if i am on the right track. i understand school is closed but i can't get this question out of my mind its either here or i wait until school reopen which means my holidays is not there all i want to do is to understand this question. :x Please help.

On September 1, Riva Co. assigns specific receivables totaling $750,000 to Pacific Bank as collateral on a $625,000, 12 percent note. Riva Co. will continue to collect the assigned accounts receivable. Pacific also assesses a 2 percent service charge on the total accounts receivable assigned. Riva Co. is to make monthly payments to Pacific with cash collected on assigned accounts receivable. Collections of assigned accounts during September totaled $260,000 less cash discounts of $3,500. What amount is owed to Pacific by Riva Co. for September collections plus accrued interest on the note to September 30?

September 1
Debit Bank (98%) 625,000 – 15,000 = $610,000
Debit Finance charges (2%) 750,000 * .02 = $15,000
Credit Pacific Bank (100%) .= $625,000
To record funds provided by bank
Debit Accounts receivable assigned = $750,000
Credit accounts receivable= $750,000

September 30
Debit Cash 260,000 – 3,500 = $256,500
Debit Discount allowed = $3,500
Credit accounts receivable assigned= $260,000
Debit Interest expense (1%) = $
Debit Pacific Bank (99%) = $
Credit Cash= $256,000
My teacher gave these option as an answer: A. $260,000......B. $262,750....C. $264,000.... D. $266,250, but she will not explain what i am doing wrong, she's always to busy.