Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 8 - Reporting and Analyzing Receivables - Exercises: E8-14

Answer

Identification of reasons for sale of Receivables: As credit sales and receivable have increased in size the normal course of business to collect the receivables in cash and remove them from the books have changed.

Work Step by Step

Now, Time is money and waiting for the normal collections process cost money. Therefore in order to accelerate the availability of cash, the companies sell their receivables to another financial services company, for a small fee as service charges.
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