Question

Mountain High Ice Cream Company transferred $74,000 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 $6,400) 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Answer:

Would handle this 2moro

Explanation:

Answer 2

Answer:

Mountain high journal S

Date

1.Cash Dr 66,600

Receivable Cr 66,600

Narration. Amount received on factoring of S74000 receivable with Prudential bank less 10%.

2.Cash Dr 5920

Receivable Cr 5920

Narration. Additional amount received on factoring of S74000 receivable with prudent bank less 2% factor price.

3. Factor cost Dr 1480

Receivable Cr 1480

Narration. Balance written off receivable as factor cost to income account.

Explanation:

There will be no entry for the fair value of ,S6400 has the transaction has already been concluded and the value cannot increase or decrease though further discount or penalties can be applied to it.