Alpha Inc Has Receivables from Unrelated Parties with a Face Value

question 48

Multiple Choice

Alpha Inc. has receivables from unrelated parties with a face value of $5,000. It transfers these receivables to bank for $4,500, without recourse. It will continue to collect the receivables, depositing them in a non-interest-bearing bank account with the cash flows remitted to the bank at the end of each month. It is not allowed to sell or pledge the receivables to anyone else and is under no obligation to repurchase the receivables from bank. Which of the following is the appropriate treatment for these Accounts receivables?

• A) It should show these receivables in its Balance Sheet.
• B) It should amortize these receivables.
• C) It should derecognize these receivables.
• D) It should derecognize these receivables if it retains the interest earned on these.

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Definitions:

Communication

The exchange of information, thoughts, messages, or feelings between individuals through various channels.

Negative Outcomes

Undesirable results or effects that can arise from a process, decision, or event.

Office Plan

A layout or design that organizes space within an office to optimize work efficiency, employee interaction, and aesthetic appeal.

Open-Door Policy

A management approach where all employees have the freedom to approach or communicate with their superiors without any barriers.