If a Company Adopts an Accounts Receivable Factoring Program, and Accounts

question 102

Multiple Choice

If a company adopts an accounts receivable factoring program, and accounts for the factoring as a sale of receivables, which of the following is true in the period the company starts the program (all else equal) ?

• A) The accounts receivable balance will increase.
• B) Cash flow from operations may increase.
• C) A retroactive restatement is necessary due to a change in accounting principle.
• D) The factoring arrangement needs to be with a consolidated entity to qualify for sale accounting.

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Definitions:

Income

The financial gain obtained by an individual or entity from work, investment, or other sources.

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Permits issued to individuals with disabilities that allow them to park in designated spaces close to building entrances for easier access.

Efficiency

The extent to which resources are allocated in the most effective manner, maximizing output from a set of inputs.

Equity

Equity refers to fairness or justice in the way people are treated and is often considered in economic and legal contexts to ensure fair distribution of resources and opportunities.