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9 May, 07:34

Mountain High Ice Cream Company transferred $63,000 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 $5,300). Mountain High anticipates a $3,300 recourse obligation. The bank charges a 3% fee (3% of $63,000), 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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  1. 9 May, 09:41
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    Journal entries for Mountain high Ice cream is given below

    Explanation:

    Journal entries:

    Debit Credit

    Cash 54810 (w1)

    Loss on receivables 6190

    Factoring amount 5300 (fair value)

    Recourse liability 3300

    Receivables 63000

    Workings 1

    63000 x 90%-3% = 54810
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