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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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When does a company record the transfer of accounts receivable as a sale? As a secured borrowing (a liability)?

To determine

State the conditions under which the transfer of accounts receivable is treated as a sale.

Explanation

Accounts receivable:

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Company must report the transfer of its receivables as a “sale”, if all of the conditions stated below are met;

  • The “assets transferred” must be isolated from Company which means that, it has to be put beyond its reach...

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