Exercise 7-24 (Algo) Factoring of accounts receivable without recourse [LO7-8] Mountain High Ice Cream Company transferred $65,000 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 $5,500) less a 3% fee (3% 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. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Answer is complete but not entirely correct.
Exercise 7-24 (Algo) Factoring of accounts receivable without recourse [LO7-8] Mountain High Ice Cream Company transferred $65,000 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 $5,500) less a 3% fee (3% 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. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Answer is complete but not entirely correct.
Chapter1: Financial Statements And Business Decisions
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![Exercise 7-24 (Algo) Factoring of accounts receivable without recourse [LO7-8]
Mountain High Ice Cream Company transferred $65,000 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 $5,500) less a 3% fee (3% 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.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
No
1
Event
1
Answer is complete but not entirely correct.
General Journal
Cash
Loss on sale of receivables
Receivable from factor
Refund liability
Accounts receivable
✓
✓
✓
X
X
Debit
56,550 X
6,450 X
5,500 X
Credit
3,500 ×
65,000 X](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff45f8a2a-f450-4d14-a99f-85887de7a617%2Ff5c59588-4d3e-47d6-9d7c-6653580d97e0%2Fttp8mxd_processed.png&w=3840&q=75)
Transcribed Image Text:Exercise 7-24 (Algo) Factoring of accounts receivable without recourse [LO7-8]
Mountain High Ice Cream Company transferred $65,000 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 $5,500) less a 3% fee (3% 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.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
No
1
Event
1
Answer is complete but not entirely correct.
General Journal
Cash
Loss on sale of receivables
Receivable from factor
Refund liability
Accounts receivable
✓
✓
✓
X
X
Debit
56,550 X
6,450 X
5,500 X
Credit
3,500 ×
65,000 X
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