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

question 146

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 the above.

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Definitions:

Necessaries

Basic essential goods required for living, which can include food, clothing, shelter, and healthcare, depending on the context.

Landlord

An individual or entity that owns property and rents it out to tenants, providing housing or commercial space in exchange for rent.

Fully Responsible

Refers to being wholly accountable for an action or situation without exception.

Contracts

Legally binding agreements between two or more parties that outline duties, rights, and obligations.