Describes the outcome if the company fraudulently claims

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Problem 1: A company has receivables of $100 on its balance sheet. It securitizes those receivables and receives cash in return. However, the securitization agreement requires the company to continue to bear the risk of default of receivables under some circumstances. Therefore, accounting rules require that the company continue to show the receivables on its balance sheet and the show the cash received as a loan. Which one of the following statements best describes the outcome if the company fraudulently claims to have sold those receivables.

a. Reported receivables will increase and reported debt will increase.
b. Reported receivables will increase and reported debt will decrease.
c. Reported receivables will decrease and reported debt will increase.
d. Reported receivables will decrease and reported debt will decrease.

Reference no: EM132976741

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