When Receivables Are Factored with Recourse and Recorded as a Loan

question 13

Multiple Choice

When receivables are factored with recourse and recorded as a loan, the transferor generally

• A) Recognizes the cost of the transfer over the term of the related loan
• B) Recognizes an immediate loss or expense and removes the receivables from the books
• C) Records a payable to factor for expected sales adjustments
• D) Does not record sales adjustments on the factored receivables

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Definitions:

Constant Dividends

Dividend payments that are expected to remain at a fixed rate over time regardless of changes in the company's earnings or profitability.

Selling Equity

Entails a company offering a portion of its ownership to investors in exchange for capital.

Compromise Policy

A strategy that aims to find a middle ground among differing opinions or conditions in policy-making.

Uncertainty

The lack of certainty or predictability in outcomes, often a factor in economic, financial, and business environments that can affect decision-making.