Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Types of Receivables

Financial Accounting

7. Receivables and Investments

Types of Receivables

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Multiple Choice

Which of the following is one way a lender can collect on a debt when the borrower defaults?

Ignore the default and write off the debt immediately

Increase the interest rate retroactively

Convert the debt into equity without consent

Seize collateral pledged by the borrower

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Verified step by step guidance

Understand the concept of collateral: Collateral is an asset pledged by the borrower to secure a loan. If the borrower defaults, the lender has the right to seize the collateral to recover the debt.

Review the options provided in the problem: Analyze each option to determine its validity and alignment with standard financial practices.

Option 1: 'Ignore the default and write off the debt immediately' - This is not a standard practice as lenders aim to recover their funds rather than immediately writing off the debt.

Option 2: 'Increase the interest rate retroactively' - Retroactively increasing the interest rate is not legally permissible and does not help recover the debt.

Option 3: 'Convert the debt into equity without consent' - Converting debt into equity requires mutual agreement between the lender and borrower. Without consent, this action is not valid. The correct option is 'Seize collateral pledged by the borrower,' as it is a standard method for lenders to recover funds when a borrower defaults.