Use the following information to solve the following questions:
During 2020 Ebert Corp. transferred inventory to Siskel Corp. and agreed to repurchase the merchandise early in 2021. Siskel then used the inventory as collateral to borrow from Southern Bank, remitting the proceeds to Ebert. In 2021 when Ebert repurchased the inventory, Siskel used the proceeds to repay its bank loan.
-This transaction is known as a(n)
A) consignment.
B) instalment sale.
C) product financing arrangement.
D) sale with delayed payment terms.

Question

Quizplus · Accepted Answer

This transaction is a product financing arrangement as it involves the transfer of inventory from one company to another with the agreement to repurchase it at a later date, and the use of the inventory as collateral for a bank loan. Consignment involves the transfer of goods where the consignor retains ownership until the consignee sells the goods. Installment sale involves the sale of goods with payment made in installments over time. Sale with delayed payment terms involves a sale where payment is delayed beyond the time of delivery.

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