Receivable Financing

Question 1

Is a way to accelerate the collection of receivables.

Answer 1

RECEIVABLE FINANCING

Question 2

Accelerating the collection of receivables either by using…

Answer 2

Accounts receivable as a loan collateral.
Selling the receivables without recourse.
Discounting of notes receivable.

Question 3

The use of receivables as a loan collateral can either be designated as…

Answer 3

PLEDGING
or an of accounts receivable
ASSIGNMENT

Question 4

Forms of Receivable Financing:

Answer 4

Pledging
Assignment
Factoring
Discounting

Question 5

Refers to the use of receivables as collateral for a loan.

Answer 5

PLEDGING

Question 6

The ONLY entry required in the books for PLEDGING would…

Answer 6

Record the loan obtained from the finance company or bank.

Question 7

The accounts receivable is _____________ by the pledging.

Answer 7

NOT AFFECTED

Question 8

A more formal borrowing arrangement in which the receivables are used as security.

Answer 8

ASSIGNMENT

Question 9

The borrower assigns the receivables to a lender and signs a promissory note.

Answer 9

ASSIGNMENT

Question 10

The EQUITY IN THE ASSIGNED ACCOUNTS is the difference between…

Answer 10

The balance of the assigned accounts AND the balance of the loan.

Question 11

Assingment may be done on a…

Answer 11

Notification or Non-notification basis.

Question 12

A sale of receivables since the transfer of these receivables is without recourse.

Answer 12

FACTORING

Question 13

The ______________ assumes the risk of collection and generally handles the billing and collection function.

Answer 13

Factor Company (Finance Company)

Question 14

A gain or loss is recognized in factoring for the difference between…

Answer 14

The proceeds received and the net carrying amount of the receivables factored.

Question 15

Factoring can either be…

Answer 15

• Casual Factoring
• Factoring as a continuing agreement

Question 16

Is a sale of the receivables at a discount.

Answer 16

Casual factoring.

Question 17

This involves the sale of accounts receivable to a financing entity on a long-term basis and where the buyer is committed to buying the receivables before the actual goods are sold to the customers on credit.

Answer 17

Factoring as a Continuing Agreement

Question 18

The collection and credit responsibilities are surrendered to the buyer as soon as goods are delivered to the customers.

Answer 18

Factoring as a Continuing Agreement

Question 19

Selling the note to the bank with recourse.

Answer 19

DISCOUNTING

Question 20

Journal Entries related to the Discounting of Notes Receivable under CONDITIONAL SALE.

Answer 20

Cash xxx
Loss on discounting xxx
Notes Receivable discounted xxx
Interest Income or Interest Receivable xxx

Question 21

Journal Entries related to the Discounting of Notes Receivable under SECURED BORROWING.

Answer 21

Cash xxx
Interest Expense xxx
Notes Receivable discounted xxx
Interest Income or Interest Receivable xxx

Question 22

A reclassification is made on the assigned accounts.

Answer 22

Assignment.

Question 23

Discounting proceeds is equal to…

Answer 23

Maturity Value LESS Discount

Question 24

If Factoring or Discounting problems are silent, then it is…

Answer 24

Without recourse.

Question 25

Discount Formula

Answer 25

Maturity Value × Discount Rate × Discount Period

*Discount period is the term life from date of discounting to full maturity.