Mountain High Ice Cream Company transferred $60,000 of accounts receivable to th

Question

Mountain High Ice Cream Company transferred $60,000 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 SS000 less a 2% fee of the total factored amount). 2% Required Prepare the journal entry to record the transfer on the books of Mountain High assuming that the sale criteria are met. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Cash    54,000.00 $60,000 X 90% Loss on Sale of Receivables      1,000.00 Receivable from Factor      5,000.00     Accounts Receivables    60,000.00 (To record the transfer of receivables) 2 Cash      3,800.00 Factoring Expense      1,200.00 $60,000 X 2%    Receivable from Factor      5,000.00 (To record the balance received)

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