When buying receivables without recourse the purchaser assumes the risk of collectibility and absorbs any credit loss.
In the gross method, sales discounts are reported as a deduction from sales
For receivables sold with recourse the seller guarantees payment to the purchaser if they debtor fails...
ACG 3131 Exam 3 Questions and
Correct Answers
When buying receivables without recourse ✅the purchaser assumes the risk of
collectibility and absorbs any credit loss.
In the gross method, sales discounts are reported as ✅a deduction from sales
For receivables sold with recourse ✅the seller guarantees payment to the purchaser if
they debtor fails to pay.
The net amount reported for short-term receivables is not affected when ✅a specific
account receivable is determined to be uncollectible.
bank balance vs cash account ✅bank balance- deposits in transit and outstanding
checks
cash account- charges for checks
A manufacturing concern would report the cost of units that were partially processed as
✅inventory in the balance sheet
Goods out on approval to customers are ✅Seller's Inventory
A company should abandon the historical cost principle when ✅the future utility of the
inventory item falls below its original cost.
When valuing raw materials inventory at lower-of-cost-or-market, what is the meaning of
the term "market"? ✅current replacement cost
Cash can be classified as a current or long-term asset. ✅true
methods of determining annual bad debt expense violates the expense recognition
concept ✅direct write-off
Aging is an ✅estimation method used with the percentage-of-accounts receivable
approach
In a transfer of receivables accounted for as a secured borrowing ✅a finance charge is
recorded
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