Logitech Corporation transferred $195,000 of accounts receivable to a local bank

Question

Logitech Corporation transferred $195,000 of accounts receivable to a local bank. The transfer was made without recourse. The local bank remits 90% of the factored amount to Logitech and retains the remaining 10%. When the bank collects the receivables, it will remit to Logitech the retained amount less a fee equal to 2% of the total amount factored. Logitech estimates a fair value of its 10% interest in the receivables of $14,000 (not including the 2% fee). What is the effect of this transaction on the company’s assets, liabilities, and income before income taxes?

Explanation / Answer

Solution:

Account Receivable Factored - $195,000
Cash Received (90%) - $175,500
Estimated uncollectable Amount = 6,000 (20,000 -14,000)
Loss on sale of Account Receivable $3,900
Due from bank - $10,100

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.