Frank Ritter, Inc. enters into an arrangement with Hisker Enterprises whereby Hisker will assume $100,000 of Ritter's
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Question:
Frank Ritter, Inc. enters into an arrangement with Hisker Enterprises whereby Hisker will assume $100,000 of Ritter's receivables for a 6% fee. These receivables have a related allowance for credit losses of $3,500.
Assuming the transaction was a collateralized loan, which one of the following entries will Ritter make to record this transaction?
Multiple Choice
- A) DRCash $94,000DRInterest expense6,000CRLoan PayableHisker Enterprises $100,000
- B) DRCash $94,000DRPrepaid interest6,000CRAccounts receivable $100,000
- C) DRCash$94,000CRLoan PayableHisker $94,000
- D) DRCash $94,000DRPrepaid interest6,000CRLoan PayableHisker Enterprises $100,000
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