Question 1 On February 1, 20X1, Mercer Associates assigned $250,000 of its trade accounts receivable to Montoya
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Question 1
On February 1, 20X1, Mercer Associatesassigned$250,000 of itstrade accounts receivableto Montoya State Bank as collateral (i.e., security) for a $200,000 loan maturing July 31, 20X1. The terms of the loan include:
- Bank assessed a finance charge (i.e., a loan fee) equal to 4% of the face amount of the loan.
- The note specifies an annual interest rate of 9% (a fair market rate for this type of loan).
- The assignment agreement provides that Mercer Associates will continue to collect customers' payments on the assigned accounts receivable.
During February 20X1, Mercer collected $130,000 on assigned accounts and remitted this amount to Montoya State Bank on February 28, 20X1, along with interest for one month on the note.
In the(MS Excel file), prepare the journal entries, in good form, required on Mercer's books to record the events identified in parts (a) - (c).In addition, respond to the questions in parts (d) and (e).Show your related calculations.
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