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:

Mortality Rate

A measure of the frequency of occurrence of death in a defined population during a specified interval.

Late Adulthood

A life stage experienced by individuals typically aged 65 and older, characterized by retirement, lifestyle changes, and increased focus on social and personal fulfillment.

Selective Optimization

A strategy that involves focusing on and maximizing one's strengths while minimizing weaknesses through selection and optimization of resources.

Compensation

A psychological strategy or an organizational policy of providing benefits, often monetary, in exchange for work or to make up for a deficiency or injury.