Preparing Entries for a Secured Borrowing and Subsequent Collections and Payments A note payable was executed by Sterling Inc. and sent to Miami Finance Company. Sterling Inc. used $240,000 of its accounts receivable as collateral for the loan. The contract provided that Miami would advance 85% of the gross amount of the receivables. Sterling Inc. continues to collect payments for the receivables, and the cash from customers is then remitted to the finance company. The cash remitted is first applied to the finance charges, with the remainder applied to principal. During the first month, customers owing $164,000 paid cash, less sales returns and allowances of $6,400, originally recorded as a refund liability. The finance charge at the end of the first month was $1,400. During the second month, the remaining receivables were collected in full, except for $1,600 written off as uncollectible. Final settlement was effected with the finance company, including payment of an additional finance charge of $600. Required a. Record the entry for Sterling to record the secured borrowing. b. Record the first month entries for Sterling to record (1) the collections and (2) the payment to Miami. c. Record the entries for Sterling to record (1) the collections for the second month and (2) the final payment to Miami. a. Account Name To record the secured borrowing. b. To record collection on receivables for first month. To record payment to Miami for the first month. C. To record collection on receivables for second month. To record payment final payment to Miami. Check Dr. Cr.