Gant Company Factored Its Receivables with Recourse to Rowlin Bank

question 14

Multiple Choice

Gant Company factored its receivables with recourse to Rowlin Bank.Gant received cash as a result of this transaction.This transaction is best described as a ________.

• A)loan from Rowlin collateralized by Gant's accounts receivable
• B)loan from Rowlin to be repaid by the proceeds from Gant's accounts receivable
• C)sale of Gant's receivables to Rowlin with the risk of uncollectible accounts retained by Gant
• D)sale of Gant's receivables to Rowlin with the risk of uncollectible accounts transferred to Rowlin

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Definitions:

Operating Fund

A reserve of cash set aside for the day-to-day financial operations of an organization, business, or government entity.

Capital Fund

A reserve of money that is set aside for long-term investment projects or to cover future expenses and liabilities.

Endowment Fund

A fund established to finance a particular purpose of an organization, where the principal is kept intact while the investment income is available for use.

Deferral Method

An accounting technique used to delay the recognition of expenses or revenues until the related cash is paid or received.