Geary Co Assigned $800,000 of Accounts Receivable to Kwik Finance Co

question 169

Multiple Choice

Geary Co. assigned $800,000 of accounts receivable to Kwik Finance Co. as security for a loan of $670,000. Kwik charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During the first month, Geary collected $220,000 on assigned accounts after deducting $760 of discounts. Geary accepted returns worth $2,700 and wrote off assigned accounts totaling $5,960.The amount of cash Geary received from Kwik at the time of the assignment was

• A) $603,000.
• B) $654,000.
• C) $656,600.
• D) $670,000.

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Definitions:

Trading Security

A financial instrument held by a firm primarily for the purpose of selling it in the short term for profit.

Available-for-sale Security

Financial securities that are not classified as held-for-trading or held-to-maturity, and thus can be sold in the market.

Accounting

The systematic process of recording, summarizing, analyzing, and reporting financial transactions of a business or individual.

Investment

The act of allocating resources, usually capital, with the expectation of generating an income or profit.