Roberts Company sold inventory to Peterson Incorporated and recorded the sale as revenue. Part of the agreement of the sale is that Roberts will repurchase the merchandise at a specified price over a specified period of time. Meanwhile, Peterson uses the inventory purchased from Roberts as collateral for a loan. Peterson uses the proceeds from the loan to pay Roberts for the inventory purchased. Roberts ultimately repurchases the inventory from Peterson. Peterson then uses the proceeds of the repayment to pay its loan obligation.
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