Frederick Company borrows $63,000 from First City Bank and pledges its receivables as security. Which of the following is true regarding this transaction:
A. Frederick Company no longer has the risk of bad debts.
B. Frederick Company's financial statements must disclose the pledging of receivables.
C. First City Bank is the factor in this transaction.
D. First City Bank takes ownership of the receivables at the time of the pledge.
E. No journal entry is required for this event.
Answer: B
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