Which of the Following Is True When Accounts Receivable Are

Multiple Choice

Which of the following is true when accounts receivable are factored without recourse?

A) The receivables are used as collateral for a promissory note issued to the factor by the owner of the receivables.
B) The financing cost (interest expense) should be recognized ratably over the collection period of the receivables.
C) The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables.
D) The transaction may be accounted for either as a secured borrowing or as a sale, depending upon the substance of the transaction.