Indicate whether the sentence or statement is true or false. ____ 5. The \"list\
ID: 2579006 • Letter: I
Question
Indicate whether the sentence or statement is true or false.
____ 5. The "list" sales price less any trade discount is the amount at which the receivable and the corresponding revenue should be recorded.
____ 6. When factoring accounts receivable without recourse, the buyer (factor) normally assumes the burden of billing and collecting accounts.
____ 7. Transferring receivables without recourse means that the bank or finance company advances cash in return for accounts receivable, but it retains the right to collect from the transferor if debtors fail to make payments when due.
____ 8. The transfer of accounts receivable with recourse should never be accounted for as a sale.
____ 9. Notes arising from loans to customers, officers, employees, and affiliated companies should be reported with the other regular trade notes receivable.
____ 10. An interest-bearing note is written as a promise to pay a face amount plus interest at a specified rate.
Explanation / Answer
5. True
Explanation:
Trade discount is not recorded in books , so sales revenue is recorded at :
=List price -trade discount.
Assume list price is $100 and 10% is trade discount than only $90 will be recorded as sales revenue and account receivable.
6. True
Explanation :
When factoring is without recourse than factor assumes the burden of billing and collecting account receivable.
7. False
Explanation:
Factor advance cash in return for accounts receivable, but in factoring without recourse , factor does not retains the right to collect from the transferor if debtors fail to make payments when due. So factor charges higher percentage fir these services.
8. False.
Explanation:
In both with recourse or without recourse , it is accounted as a sale of account receivable.