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On January 1, 2013, XYZ Inc. assigned $500,000 of their A/R to Finance, Inc. Finance...

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Accounting

On January 1, 2013, XYZ Inc. assigned $500,000 of their A/R to Finance, Inc. Finance agreed to pay XYZ 80% of its assigned A/R in cash, less a $10,000 service charge. Finance will also charge 12% interest on any outstanding balances. On the last day of each month, ABC remitted the cash collected from assigned accounts to Finance, Inc.

At the end of January, XYZ collected $200,000 in assigned A/R and also had $10,000 in sales returns during the month.

By the end of February, XYZ collected another $80,000 of assigned A/R less sales discounts taken in the amount of $2,500 during the month.

  1. What is the balance in the Note Payable account at the end of February?
  2. What is the balance in the A/R Assigned account at the end of February?
  3. What is the net effect on net income of all the transactions in 2013 related to the assigned accounts?

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