1. Assuming the transaction was a collateralized loan, which one of the following entries will Ritter make to record this transaction?

Multiple Choice

• DR Cash $94,000 CR Loan PayableHisker $94,000

• DR Cash $94,000 DR Prepaid interest 6,000 CR Accounts receivable $100,000

• DR Cash $94,000 DR Prepaid interest 6,000 CR Loan PayableHisker Enterprises $100,000

• DR Cash $94,000 DR Interest expense 6,000 CR Loan PayableHisker Enterprises $100,000

2.

Which of the following statements is false regarding factoring receivables?

Multiple Choice

• When a company factors its receivables with recourse, it cannot be required to make a payment to the factor if a customers account proves to be uncollectible.

• When a company accepts credit cards, it is engaging in a form of factoring.

• When a company sells its accounts receivable to a factor with recourse, a recourse obligation that is recorded would be a credit entry on its books.

• Factoring can be done either with or without recourse.