On December 1, Year 1, Traylor Company sells $100,000 of short-term trade receivables to Main Street Bank for $98,000 in cash by guaranteeing to buy back the first $15,000 of defaulted receivables. Traylor's historic rate of noncollection on receivables is 5 percent. Traylor notifies the customers affected that they should make payment on their accounts directly to Main Street Bank.
Required:
Determine whether the sale of receivables by Traylor Company qualifies for derecognition.