Docile Company

Requirement: Prepare journal entries Debit Credit

Jul-01 Accounts receivable - assigned 1,500,000

Accounts receivable 1,500,000

1 Cash (1,125,000 - 60,000) 1,065,000

Service charge (4%*1.5m) 60,000
Notes payable - bank 1,125,000

Aug-01 Notes payable - bank 800,000

Accounts receivable - assigned 800,000

1 Interest expense (2%*1,125,000) 22,500

Cash 22,500

Sep-01 Cash 168,500

Interest expense 6,500
Notes payable - bank 325,000
Accounts receivable - assigned 500,000

Accounts receivable 200,000

Accounts receivable - assigned 200,000

Computation of cash on Sept1

Collection by bank 500,000

Less: Payment of loan (1,125,000-800k) 325,000
Excess collection 175,000
Less: Interest (2%*325,000) 6,500
Cash remittance from bank 168,500