Question

Mountain High Ice Cream Company transferred $66,000 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 $5,600) less a 2% fee (2% of the total factored amount).

Answer 1

The question describes a financial transaction where Mountain High Ice Cream Company factors its accounts receivable to Prudential Bank, which retains a portion and will return the remaining minus a fee.

Step-by-step explanation:

The student's question involves a transaction wherein the Mountain High Ice Cream Company has transferred accounts receivable to the Prudential Bank without recourse. The question describes how Prudential Bank retains a portion of the receivables and will remit the remaining amount back to Mountain High after collecting the receivables, subtracting a fee. The overall scenario concerns the financial concepts of factoring accounts receivable and calculating the actual amount that will be remitted back to the company once the collection has occurred and the fees have been deducted.