Which of the Following Is True When Accounts Receivable Are

question 90

Multiple Choice

Which of the following is true when accounts receivable are factored without recourse?

• A) The receivables are used as collateral for a promissory note issued to the factor by the owner of the receivables.
• B) The financing cost (interest expense) should be recognized ratably over the collection period of the receivables.
• C) The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables.
• D) The transaction may be accounted for either as a secured borrowing or as a sale, depending upon the substance of the transaction.

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Definitions:

Securities Exchange Act of 1934

United States legislation that governs the trading of securities, such as stocks and bonds, to protect investors against fraud.

Purpose

The reason for which something is done or created, or for which something exists. It serves as a guiding principle in decision-making and strategy.

Registration Form S-4

A form used by a company for registering securities that will be exchanged in a merger or acquisition with the SEC.

Purpose

Purpose refers to the reason for which something is done or created, or for which something exists; it often drives the objectives, goals, and strategies of individuals and organizations.