Logitech Corporation transferred $100,000 of accounts receivable to a local bank. The transfer was made without recourse. The local bank remits 85% of the factored amount to Logitech and retains the remaining 15%. When the bank collects the receivables, it will remit to Logitech the retained amount less a fee equal to 3% of the total amount factored. Logitech estimates a fair value of its 15% interest in the receivables of $11,000 (not including the 3% fee). What is the effect of this transaction on the company's assets, liabilities, and income before income taxes? Assets Liabilities Income before income taxes decreased by would not change decreased by
Logitech Corporation transferred $100,000 of accounts receivable to a local bank. The transfer was made without recourse. The local bank remits 85% of the factored amount to Logitech and retains the remaining 15%. When the bank collects the receivables, it will remit to Logitech the retained amount less a fee equal to 3% of the total amount factored. Logitech estimates a fair value of its 15% interest in the receivables of $11,000 (not including the 3% fee). What is the effect of this transaction on the company's assets, liabilities, and income before income taxes? Assets Liabilities Income before income taxes decreased by would not change decreased by
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Logitech Corporation transferred $100,000 of accounts receivable to a local bank. The transfer was made without recourse. The local
bank remits 85% of the factored amount to Logitech and retains the remaining 15%. When the bank collects the receivables, it will
remit to Logitech the retained amount less a fee equal to 3% of the total amount factored. Logitech estimates a fair value of its 15%
interest in the receivables of $11,000 (not including the 3% fee).
What is the effect of this transaction on the company's assets, liabilities, and income before income taxes?
Assets
Liabilities
Income before income taxes
decreased by
would not change
decreased by
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