On December I, Year 1, Traylor Company sells $100,000 of short-term trade receiv- ables to Main Street Bank for $98,000 in cash by guaranteeing to buy back the first $15,000 of defaulted receivables. Traylor's historic rate of noncollection on receiv- ables is 5 percent. Traylor notifies the customers affected that they should make pay-
On December I, Year 1, Traylor Company sells $100,000 of short-term trade receiv- ables to Main Street Bank for $98,000 in cash by guaranteeing to buy back the first $15,000 of defaulted receivables. Traylor's historic rate of noncollection on receiv- ables is 5 percent. Traylor notifies the customers affected that they should make pay-
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:37. On December I, Year 1, Traylor Company sells $100,000 of short-term trade receiv-
ables to Main Street Bank for $98,000 in cash by guaranteeing to buy back the first
$15,000 of defaulted receivables. Traylor's historic rate of noncollection on receiv-
ables is 5 percent. Traylor notifies the customers affected that they should make pay-
ment on their accounts directly to Main Street Bank.
Required:
Determine whether the sale of receivables by Traylor Company qualifies for
derecognition.
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