Mountain High Ice Cream Company transferred $69,000 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 $5,900). Mountain High anticipates a $3,900 recourse obligation. The bank charges a 3% fee (3% of $69,000), and requires that amount to be paid at the start of the factoring arrangement.
Required: Prepare the journal entry to record the transfer on the books of Mountain High assuming that the sale criteria are met.
Record the transfer of accounts receivable:
| Event | General Journal | Debit | Credit |
| 1 | |||
| Event | General Journal | Debit | Credit |
| 1 | Cash((90% - 3%) × $69,000) | $60,030 | |
| Loss on sale of Receivable | $6,970 | ||
| Receivable from factor | $5,900 | ||
| Recourse liability | $3,900 | ||
| Account Receivable | $69,000 | ||
| (To record transfer of account Receivable) |
Mountain High Ice Cream Company transferred $69,000 of accounts receivable to the Prudential Bank. The transfer...