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.

---

Definitions:

Middle Paragraph

In writing, the part of a text that develops the main idea, situated between the introduction and the conclusion.

Routine Reply

A standard or typical response given to common inquiries or situations.

Benefits

Particular advantages that readers will realize from a product’s selling points.

Positive Message

Communication that conveys good news, positive feedback, or constructive information.