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Accounts receivable assigned

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On October 1, 2010, Chung, Inc. assigns $1,000,000 of its accounts receivable to Seneca National Bank as collateral for a $750,000 note. The bank assesses a finance charge of 2% of the receivables assigned and interest on the note of 9%. Prepare the October 1 journal entries for both Chung and Seneca.

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The solution explains how to prepare the journal entries for accounts receivable assigned.

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1. The charge is 1,000,000 X 2% = $20,000 and so cash received is 730,000. The journal entry for Chung is
Oct 1 Cash Dr 730,000
...

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