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 14RE: On June 1, Phillips Corporation sold, with recourse, a note receivable from a customer to a bank....
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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
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