In April 2018, Fine Dining Ltd, lent its newly established subsidiary Pasta-to-go Ltd $1,000,000 for 8 years at a commercial rate of interest of 5%. Interest was payable annually and the capital was repayable at the end of the loan term.

In May 2021, Fine Dining Ltd needed additional working capital. Fine Dining Ltd did not want to call in the loan to Pasta-to-go as Pasta-to-go was becoming profitable. Fine Dining Ltd sold its right to the interest income to LMN Bank for $150,000 which was to be paid to Fine Dining Ltd in 10 monthly amounts of $15,000.

How should the receipt of $150,000 be treated by Fine Dining Ltd Ltd?

Answer rating: 100% (QA)

As capital because Fine Dining Ltd has reali... View the full answer