Prepare the journal entry to record the transfer on the book

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Reference no: EM132405021

Question :

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 11.17/16.66 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.

Reference no: EM132405021

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