The classification of the transaction as a sale or a borrowing may be incorrect when _________.
A)factoring receivables with recourse
B)estimating the likelihood of collection within the next year
C)writing off customers' balances as uncollectible
D)debating over the timing and amount of revenue to be recognized

Question

Quizplus · Accepted Answer

Factoring receivables with recourse involves the sale of receivables to a third party, but the seller retains the risk of non-payment and must make payments to the third party if the receivables are not collected. Therefore, it may not be classified as a sale or a borrowing, but rather a combination of both.

The Classification of the Transaction as a Sale or a Borrowing