Assume That the Transaction Was a Factoring Arrangement with Recourse

question 12

Multiple Choice

Assume that the transaction was a factoring arrangement with recourse and included a holdback of $6,000.If the fair value of the recourse obligation is equal to the allowance of $3,500,which one of the following entries will Ritter make to record this transaction?

• A) \(\begin{array}{lrr}
• \text { DR Cash } & 100,000 & \\
• \text { DR Allowance for doubtful accounts } & 3,500 & \\
• \text { CR Accounts receivable } & & 100,000 \\
• \text { CR Recourse obligation } && 3,500
• \end{array}\)
• B) \(\begin{array}{lrr}
• \text { DR Cash } & 88,000 & \\
• \text { DR Loss on sale of receivables } & 6,000 & \\
• \text { DR Allowance for doubtful accounts } & 3,500 & \\
• \text { DR Due from Hisker Enterprises } & 6,000 & \\
• \text { CR Accounts receivable } & & 100,000 \\
• \quad \text { CR Recourse obligation } & & 3,500
• \end{array}\)
• C) \(\begin{array}{lll}
• \text { DR Cash } & 88,000 & \\
• \text { DR Loss on sale of receivables } & 12,000 & \\
• \quad \text { CR Accounts receivable } & & 100,000
• \end{array}\)
• D) \(\begin{array}{lll}
• \text { DR Cash } & 88,000 & \\
• \text { DR Loss on sale of receivables } & 12,000 & \\
• \quad \text { CR Due to Hisker Enterprises } & & 100,000
• \end{array}\)

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Definitions:

Executive Branch

The branch of federal and state government that is broadly responsible for implementing, supporting, and enforcing the laws made by the legislative branch and interpreted by the judicial branch.

Judicial Branch

One of the three branches of the U.S. government, responsible for interpreting the laws and the Constitution, and comprised of the Supreme Court and lower federal courts.

Presidential Election of 1876

A highly contested election where Rutherford B. Hayes was declared the winner over Samuel J. Tilden after a compromise that effectively ended Reconstruction by removing federal troops from the South.

Reconstruction

The period following the Civil War in the United States, focused on rebuilding the country and integrating formerly enslaved people into society.