The Grass is Greener Corporation is owed $11,890 from 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 can legally secure the repayment of the debt with interest. It strengthens their position and makes it more likely that they will be repaid, rather than relying solely on the client's promise to pay. It may not necessarily decrease net income or reduce tax liability, and it may not eliminate all doubts of collection, but it does provide a more secure means of collecting the debt.

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