Question

Mountain High Ice Cream Company transferred $70,000 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 $6,000) 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

Event	Account	Debit	Credit
1	Cash (70,000*90%)	63,000
	Loss on sale of receivables	2,400
	Receivable from factor 6000 - (70,000*2%)	4,600
	Accounts Receivable		70,000