Gant Company factored its receivable with recourse to Rowlin Bank. Gant received cash as a result of this transaction. Assuming the three conditions for a sale are met, this transaction is best described as a ________.
A) loan from Rowlin collateralized by Gant's accounts receivable
B) loan from Rowlin to be repaid by the proceeds from Gant's accounts receivable
C) sale of Gant's receivables to Rowlin with the risk of uncollectible accounts retained by Gant
D) sale of Gant's receivables to Rowlin with the risk of uncollectible accounts transferred to Rowlin

Question

Quizplus · Accepted Answer

When receivables are factored with recourse and the conditions for a sale are met, it is considered a sale of receivables where the seller retains the risk of uncollectible accounts.

Gant Company Factored Its Receivable with Recourse to Rowlin Bank