This solution doesn\'t work Exercise 7-21 Factoring of accounts receivable with

Question

This solution doesn't work
Exercise 7-21 Factoring of accounts receivable with recourse under IFRS [LO7-8, 7-10] Mountain High Ice Cream Company reports under IFRS. Mountain High transferred $60,000 of accounts receivable to the Prudential Bank. The transfer was made with recourse Prudential remits 90% of the factored amount to Mountain High and retains 10% to cover sales returns and allowances. When the bank collects the receivables, it will remit to Mountain High the retained amount (which Mountain estimates hasa f value of $5,000 Mountain High anticipates a $3,000 recourse obligation. The bank charges a 2% fee 2% of $60,000 and requires that amount to be paid at the start of the factoring arrangement. Mountain High has transferred control over the receivables, but determines that it stll retains substantially all risks and rewards associated with them. Required: Prepare the journal entry to record the transfer on the books of Mountain High, considering whether the sale criteria under IF been met (If no entry is required for a transaction/event, select "No journal entry required" in the first account fi RS have 3 Answer is not complete. Event General Journal Debit Credit Cash 52.800

Explanation / Answer

Answer:

working: a).cash = 60000- 10%= 54000

b) loss on sale of receivables= is determine by 2% fee and 3000 recourse obligation.

=60000*2%+3000==1200+3000= 4200

c)Receivable from factor: Bankk retain 10% and substract fee of 2%

=60000*10%- 1200 = 6000-1200= 4800

Date PArticular Amount Amount Cash 54000 Loss on sale of receivalble 4200 Receivable from factor 4800 Account Receivable 60000 recouse obligation 3000 (To record the sale of account receivbles)

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.