Choose the Correct Statement About Recording the Discounting (With Recourse)

question 96

Multiple Choice

Choose the correct statement about recording the discounting (with recourse) of a customer's four-month note with a financial institution. Assume the note is held for a month before it is discounted.

• A) The notes receivable discounted account represents both a contra-notes receivable and a contingent liability.
• B) There is only one way to disclose the contingent liability.
• C) The gain or loss on discounting equals the difference between the proceeds and the face value of the note.
• D) The financial institution bases its discount (fee) on the face value of the note.

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