1. This is the criterion to determine whether the transfer is accounted for as borrowing.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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EXERCISE 1
After reading all the terms, principles, and concepts on Receivable Financing, let us check your
understanding of these. In the space provided, write the term/s being asked in the following
statements:
1. This is the criterion to determine whether the transfer is accounted for as
borrowing.
2. What account to debit if the company pays a delinquent notes receivable that
was previously discounted.
3. What account to credit if the customer's notes receivable become delinquent
and was not previously discounted.
4. When accounts receivable is factored, the accounts payable shall be credited.
True or False?
5. The interest on a non-interest bearing note is equal to its discount amount.
6. The practice of realizing cash from accounts receivable before its maturity date
is widespread. Defalcation is one of them. True or False?
7. A 120-day, 10% interest-bearing note receivable is sold to a bank with recourse
after being held for 60 days. The proceeds are calculated using an 8% interest rate. In this situation,
what happened to the notes receivable? OMNIA
8. On January 1, an entity received a one-year note receivable bearing interest at
the market rate. The face value of the note receivable and the entire interest are due in one year.
When the note receivable was recorded on January 1, the Interest receivable is debited. True or False?
Transcribed Image Text:EXERCISE 1 After reading all the terms, principles, and concepts on Receivable Financing, let us check your understanding of these. In the space provided, write the term/s being asked in the following statements: 1. This is the criterion to determine whether the transfer is accounted for as borrowing. 2. What account to debit if the company pays a delinquent notes receivable that was previously discounted. 3. What account to credit if the customer's notes receivable become delinquent and was not previously discounted. 4. When accounts receivable is factored, the accounts payable shall be credited. True or False? 5. The interest on a non-interest bearing note is equal to its discount amount. 6. The practice of realizing cash from accounts receivable before its maturity date is widespread. Defalcation is one of them. True or False? 7. A 120-day, 10% interest-bearing note receivable is sold to a bank with recourse after being held for 60 days. The proceeds are calculated using an 8% interest rate. In this situation, what happened to the notes receivable? OMNIA 8. On January 1, an entity received a one-year note receivable bearing interest at the market rate. The face value of the note receivable and the entire interest are due in one year. When the note receivable was recorded on January 1, the Interest receivable is debited. True or False?
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