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How much loss shall be recognized by ABC on May

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Question - On May 1, 2020, ABC Incorporated discounted their 12 month, 10% note amounting to 5,000,000 at a bank for 12% on a with recourse basis. The note was received from a customer on December 1, 2019. Upon its maturity, the note was eventually collected by the bank.

a. If the discounting is accounted for as a secured borrowing, how much loss shall be recognized by ABC on May 1?

b. If the discounting is accounted for as a conditional sale, by how much would the liability account of ABC increase on May 1?

c. If the discounting is accounted for as a secured borrowing, give the entry to record transactions on May 1, 2020.

d. If the discounting is accounted for as a conditional sale, give the entry to record transactions when the note was eventually collected.

Reference no: EM132996270

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