High Point Hotel (HPH) has $218,000 in accounts receivable. To finance a major purchase, the company assigns these receivables to Cross Town Bank. Which one of the following statements correctly describes this transaction?
A) HPH will immediately receive $218,000 and will have no further obligation related to these receivables.
B) HPH will receive some amount of cash immediately while maintaining full responsibility for any uncollected receivables.
C) Cross Town Bank accepts full responsibility for the collection of the accounts receivables and, in exchange, immediately pays HPH a discounted value for its receivables.
D) Cross Town Bank accepts full responsibility for collecting the accounts receivables and pays HPH a discounted price for the accounts collected after the normal collection period has elapsed.
E) HPH receives the full amount of its receivables upon assignment but must reimburse Cross Town Bank for any uncollected account.

Question

Quizplus · Accepted Answer

HPH will receive some cash upfront but retains responsibility for any uncollected receivables, as the receivables are assigned, not sold.

High Point Hotel (HPH) Has $218,000 in Accounts Receivable