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zepelin [54]
2 years ago
10

Mountain High Ice Cream Company transferred $68,000 of accounts receivable to the Prudential Bank. The transfer was made without

recourse. Prudential remits 90% of the factored amount to Mountain High and retains 10%. When the bank collects the receivables, it will remit to Mountain High the retained amount (which Mountain estimates has a fair value of $5,800) less a 2% fee (2% of the total factored amount).
Required:
Prepare the journal entry to record the transfer on the books of Mountain High assuming that the sale criteria are met.
Business
1 answer:
Maurinko [17]2 years ago
7 0

Answer:

Dr Cash $59,840

Dr Loss on Sale of Receivables $8,160

Dr Recievable from Factor $5,800

Cr Recourse liability $5,800

Cr Accounts Receivable $68,000

Explanation:

Preparation of the journal entry to record the transfer on the books of Mountain High assuming that the sale criteria are met.

Dr Cash $59,840

[(68,000 x .90) - (68,000 x .02)]

Dr Loss on Sale of Receivables $8,160

[(5,800 + 68,000) - ($59,840 + 5,800)]

Dr Recievable from Factor $5,800

Cr Recourse liability $5,800

($59,840+$8,160+5800-68,000)

Cr Accounts Receivable $68,000

(To record the transfer on the books of Mountain High)

Dr Loss on Sale of Rec = (5,800 + 68,000) - ($59,840 + 5,800) = $8,160

73,800-65650

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