Moon Inc Assigns $1,500,000 of Its Accounts Receivables as Collateral

question 13

Multiple Choice

Moon Inc assigns $1,500,000 of its accounts receivables as collateral for a $1 million loan with a bank.The bank assesses a 3% finance fee and charges interest on the note at 6%.What would be the journal entry to record this transaction?

• A)Debit Cash for $970,000, debit Finance Charge for $30,000, and credit Notes payable for $1,000,000.
• B)Debit Cash for $970,000, debit Finance Charge for $30,000, and credit Accounts Receivable for $1,000,000.
• C)Debit Cash for $970,000, debit Finance Charge for $30,000, debit Due from Bank for $500,000, and credit Accounts Receivable for $1,500,000.
• D)Debit Cash for $910,000, debit Finance Charge for $90,000, and credit Notes Payable for $1,000,000.

Understand the implications of net operating losses on tax reporting and planning.

Recognize the potential for managerial manipulation of net income through deferred income tax accounting.

Assess earnings quality through changes in deferred tax accounts.

Interpret the requirement for reconciling effective income tax rates with statutory rates.

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