USA Assignement/novation of Loan

[Mr. Hudson]

Hey guys. I am at a loss at the bookkeeping for the assignment/novation of a loan.

Company A lent Company B $1,000,000.
Company A then assigned the loan to Company C.

What would be the entries in Company C's books.

DR - Loan Receivable $1,000,000
CR - ??????? $1,000,000

 

[kirby]

assignment is not same as novation
so which one did you have here ??

 

[Mr. Hudson]

Novation

 

[kirby]

To make sure: in a novation contact, parties A , B and C had to all agree to do this, hopefully in writing.

Anyway, in a novation for above case:

Company C takes on the debt of B and now owes that to A
Since C does not do so for fun, C must therefore have to get the bucks that B originally borrowed else why would C do this?

So C's entry at novation is

DR Receivable from B $1,000,000
CR Loan payable to A $1,000,000