Interest Costs Are Included in the Cost of an Asset

question 211

Multiple Choice

Interest costs are included in the cost of an asset in conjunction with

• A)long-term assets being purchased.
• B)long-term assets acquired for speculative purposes.
• C)long-term assets being constructed.
• D)natural resources and intangible assets.

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Definitions:

Factoring

A financial transaction where a business sells its accounts receivable to a third party (the factor) at a discount, in order to receive immediate cash.

With Recourse

A term indicating that if the primary party defaults on an obligation, the lender or third party has the right to seek repayment from the signer of the instrument.

Factoring Without Recourse

A financial transaction where a business sells its invoices to a third party without the obligation of repurchase if the invoices go unpaid.

Bad Receivables

Amounts owed to a company that are unlikely to be paid by the debtor, often due to financial difficulty.