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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Check the explanation

Explanation:

DR Cash

DR Loss on sale of receivables

DR Receivable from factor  

CR Accounts receivable  

                                               Debit       Credit  

1  Cash                                  58500                      =65000*(1-10%)

Loss on sale of receivables  2200  

Receivable from factor          3800                =5500-(65000*2%)

     Accounts receivable                      60000  

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