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. 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. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. No Event 1 1 Cash Interest receivable Answer is not complete. General Journal Debit Credit 52,800 5,000 × 5,200 x 3,000 × 60,000 Gain on sale of investments Refund liability Accounts receivable

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter6: Cash And Receivables
Section: Chapter Questions
Problem 10RE: On December 1 of the current year, Jordan Inc. assigns 125,000 of its accounts receivable to...
icon
Related questions
Question

Vikrambhai 

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.
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.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
No
Event
1
1
Cash
Interest receivable
Answer is not complete.
General Journal
Debit
Credit
52,800
5,000 ×
5,200 x
3,000 ×
60,000
Gain on sale of investments
Refund liability
Accounts receivable
Transcribed Image Text: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. 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. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. No Event 1 1 Cash Interest receivable Answer is not complete. General Journal Debit Credit 52,800 5,000 × 5,200 x 3,000 × 60,000 Gain on sale of investments Refund liability Accounts receivable
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning