If the discount is 'with recourse',the discount mechanism for notes creates:

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Quizplus · Accepted Answer

"With recourse" means that the holder of the note can seek payment from the seller if the primary borrower defaults. Therefore, the seller is still liable for the payment, creating a contingent liability for the seller. A provision would be set aside for an expected loss, but it is not applicable in this scenario. An accrued liability is for expenses that have been incurred but not yet paid, which is also not applicable here.

If the Discount Is 'With Recourse',the Discount Mechanism for Notes