Question

5 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 has a fair 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 still retains substantially all risks and rewards associated with them 16.66 points Required: Prepare the journal entry to record the transfer on the books of Mountain High, considering whether the sale criteria under IFRS have been met. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) eBook Print View transaction list References Journal entry worksheet 1 Record the transfer of accounts receivable Note: Enter debits before credits Event General Journal Debit Credit 1 Record entry Clear entry View general journal LO

Answer 1

General Journal	Debit	Credit
Cash	52800		=60000*(1-10%-2%)
Finance charge expense	1200		=60000*2%
Liability		54000