Which of the Following Is True When Accounts Receivable Are

question 29

Multiple Choice

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

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

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Definitions:

Personal Selling

A direct sales approach involving face-to-face interaction between a salesperson and a customer, aimed at persuading the customer to make a purchase.

Two-way Communication

An interactive form of communication where both parties can send and receive messages, facilitating mutual understanding and feedback.

Purchase Decision

The process that leads a consumer to buy a product or service after considering various factors.

Sales Promotion

A strategy in marketing that employs brief incentives to motivate buying or selling a product or service.