Asked by Kristopher Curry on Apr 27, 2024
Verified
O'Rourke Co.reports assigned accounts receivable of $90, 000 that relate to an unpaid note payable of $40, 000.Correct balance sheet disclosure is
A)
Current assets:
Accounts receivable assigned $90,000\quad\quad\quad \$ 90,000 $90,000
Less: Note payable 40,000‾ \quad\quad\quad\quad\quad\quad\quad \underline{40,000} 40,000
Equity in accounts receivable assigned $50,000\quad \$ 50,000 $50,000
B)
Current assets:
Equity in accounts receivable assigned $50,000\quad\quad\quad \$ 50,000 $50,000
C)
Current assets:
Accounts receivable assigned $90,000\quad\quad \$ 90,000 $90,000
Current liabilities:
Note payable $40,000\quad\quad\quad\quad\quad\quad \$ 40,000 $40,000
D)
Current assets:
Accounts receivable assigned $50,000 \quad \$ 50,000 $50,000
Current liabilities:
Note payable $50,000\quad\quad\quad\quad\quad\quad \$ 50,000 $50,000
Less: Accounts receivable assigned 50,000$−0−\quad\quad\quad \frac{50,000}{\$-0-} $−0−50,000
Accounts Receivable Assigned
A financing arrangement where a company uses its receivables as collateral to secure a loan.
Note Payable
A written promise to pay a specific sum of money on a certain date or upon demand to the bearer or order.
- Distinguish between the balance sheet presentation of accounts receivable and the associated debt instruments.
Verified Answer
BF
Brigith FloresMay 01, 2024
Final Answer :
C
Explanation :
The correct balance sheet disclosure separates the full amount of the assigned accounts receivable ($90,000) under current assets and the note payable ($40,000) under current liabilities, without netting the two against each other. This approach maintains the clarity of the financial position by showing both the asset and the liability separately.
Learning Objectives
- Distinguish between the balance sheet presentation of accounts receivable and the associated debt instruments.
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