The Grass is Greener Corporation is owed $11,890 by a client for landscaping. The account is overdue and the client is having difficulty paying. Why might the Grass is Greener Corporation extend a note receivable to the client?
A) The loan will decrease the net income of the Grass is Greener Corporation for the current accounting period.
B) The loan will strengthen the Grass is Greener Corporation's legal right to be repaid with interest.
C) The loan will reduce the tax liability for the Grass is Greener Corporation.
D) The loan will eliminate any doubts of collection of the amount due.

Question

Quizplus · Accepted Answer

By extending a note receivable, the Grass is Greener Corporation strengthens their legal right to be repaid with interest. This creates a legal obligation on the client to repay and can potentially provide more security for the Grass is Greener Corporation in collecting the amount due. It also provides a more formal agreement between the two parties that outlines repayment terms, which can be helpful in the event of future disputes. The other options (A, C, and D) do not apply in this situation.

The Grass Is Greener Corporation Is Owed $11,890 by a Client