A Company Regularly Sells Its Receivables to a Factor Who

question 191

Multiple Choice

A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables?

• A) The loss section of the income statement will increase each time receivables are sold.
• B) The credit to Accounts Receivable is less than the debit to Cash when the accounts are sold.
• C) Selling expenses will increase each time accounts are sold.
• D) The other expenses section of the income statement will increase each time accounts are sold.

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Definitions:

Space Requirements

The area needed to perform operations or activities, often considered in planning and design of facilities.

Slotting Fees

Fees manufacturers pay to get shelf space for their products.

Wholesalers

Businesses that purchase goods in bulk from producers to resell them in smaller quantities to retailers or other businesses.

Precedence Chart

A graphical representation of the order in which tasks or activities must be performed in a project or process.