A Company Regularly Sells Its Receivables to a Factor Who

question 122

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 income and expense section of the income statement will increase each time accounts are sold.

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Definitions:

Oedipus Complex

According to Freud, a boy’s sexual desires toward his mother and feelings of jealousy and hatred for the rival father.

Pleasure Principle

A concept in psychoanalytic theory referring to the instinctual seeking of pleasure and avoiding of pain to satisfy biological and psychological needs.

Reality Principle

A psychoanalytic concept referring to the ability of the mind to assess the external world and act upon it accordingly, balancing with the pleasure principle.

Ego

In psychoanalytic theory, the part of the personality responsible for dealing with reality while satisfying the demands of the id and superego.