Sander\'s Fence Company borrowed $ 310,000 from Helmut Capital by issuing a 3-ye

Question

Sander's Fence Company borrowed $ 310,000 from Helmut Capital by issuing a 3-year (36-month), 6 % note payable. Sander's uses $ 330,000 of its accounts receivable as collateral for the lending arrangement, transferring the right to the receivable payments if Sander defaults on the loan. Sander services the accounts receivable, sending bills and collecting the payment from customers. Sander must pay Helmut $ 9,300 at the end of month regardless of the amount of the receivables it collects. At the end of the first month, Sander has collected $ 8 comma 900 of the receivables that are collateral for the loan and pays $ 9,300 to Helmut plus interest.

Determine whether Sander's borrowing from Helmut would be treated as a borrowing or sale under U.S. GAAP.

In order to be a sales transaction, ___A____ conditions must be met. Sander treats the arrangement as a __B____ because Sander___C___.

A: 2, 3, 4, or 5

B: Sale or Secured Borrowing

C: Does not meet any conditions, Meets all conditions, or meets only one of the conditions.

Explanation / Answer

A) 2

i) property in goods has been transfered to buyers

ii)for a consideration

B)since the transaction fails to meet definition of sales ,it is a case of secured borrowing

c)meets only one of the conditions. (for a consideration ) -but fails to meet that property in goods is transfered.

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