Accounting for the Pledging of Accounts Receivable as Collateral for a Loan

question 10

Multiple Choice

Accounting for the pledging of accounts receivable as collateral for a loan requires:

• A)Reporting the receivables net of the borrowed amount.
• B)Removal of the pledged receivables from current assets and including them with noncurrent investments.
• C)Disclosure of the arrangement in notes to the financial statements.
• D)None of these.

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Definitions:

Narcotic Effect

A concept in psychology and sociology referring to the diminished response of an individual or group to a stimulus or event due to repeated exposure over time.

Third Party Dispute Resolution

A process where an independent entity helps resolve a conflict or dispute between two other parties, often used in legal, commercial, and labor contexts.

Collective Bargaining

A process of negotiation between employees, through their representatives, and employers on the terms of employment, including wages, hours, and working conditions.

Arbitrator

A neutral third party chosen to resolve disputes between parties, who makes decisions that are usually binding.