Moon Hardware is planning to factor some of its receivables.The cash received will be used to pay for inventorypurchases. The factor has indicated that it willrequire “recourse” on the sold receivables. Explain tothe controller of Moon Hardware what “recourse” isand how the recourse will be reflected in Moon’s financialstatements after the sale of the receivables.
Moon Hardware is planning to factor some of its receivables.The cash received will be used to pay for inventorypurchases. The factor has indicated that it willrequire “recourse” on the sold receivables. Explain tothe controller of Moon Hardware what “recourse” isand how the recourse will be reflected in Moon’s financialstatements after the sale of the receivables.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Moon Hardware is planning to factor some of its receivables.
The cash received will be used to pay for inventory
purchases. The factor has indicated that it will
require “recourse” on the sold receivables. Explain to
the controller of Moon Hardware what “recourse” is
and how the recourse will be reflected in Moon’s financial
statements after the sale of the receivables.
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