Receivable Financing

What is the main purpose of factoring?

• To increase accounts receivable

• To decrease accounts receivable

• To transfer ownership of accounts receivable

• To create more debt for the company

In factoring, who assumes responsibility for the collection of accounts receivable?

• The assignor

• The factor

• The bank

• The customer

What is a factor's holdback?

• A predetermined amount for protection against customer returns and allowances

• A fee for factoring services

• A commission paid to the factor

• A discount on the face value of a note receivable

In factoring as a continuing agreement, what is recognized as a loss?

• The factoring fee

• The factor's holdback

• The amount of the accounts receivable

• The difference between the carrying amount of the note and the proceeds

In discounting of notes receivable, who becomes the endorser?

• The bank

• The customer

• The payee

• The factor

What is the net proceeds in discounting of notes receivable?

• The maturity value minus the discount

• The principal amount plus the interest

• The amount due on the note at the maturity date

• The interest for the full term of the note

What is the maturity date in discounting of notes receivable?

• The date of discounting

• The date on which the note should be paid

• The date of maturity value

• The date of interest accrual

What is the discount in discounting of notes receivable?

• The amount deducted by the bank in advance

• The amount due on the note at the maturity date

• The amount of interest for the full term of the note

• The rate used by the bank in computing the discount

What is discounting of notes receivable?

• The process of selling notes receivable to a third-party

• The process of borrowing against notes receivable

• The process of receiving cash for a note receivable before its maturity

What is the accounting treatment for factored accounts receivable?

• Included in the carrying amount of accounts receivable

• Excluded from the carrying amount of accounts receivable

• Presented separately from accounts receivable