Drug King transfers credit card receivables to InsureAll. The credit card receivables have a fair value of
Fantastic news! We've Found the answer you've been seeking!
Question:
Drug King transfers credit card receivables to InsureAll. The credit card receivables have a fair value of $100 (book value is $99) and were transferred to InsureAll for $150. The transfer includes an option, which expires in 10 days, for InsureAll to put the assets back to DrugKing at $151. The possibility of the fair value of the asset increasing to $151 in 10 days is considered remote and, therefore, the exercise price of the option appears to be sufficiently favorable such that it is probable at inception that it will be exercised. The transfer price of $150 represents the fair values of the credit card receivables ($100) and the put option ($50).
IS THIS SALE OR FINANCING?
EXPLAIN.
Posted Date: