Answer:
Asset will decrease by 5,650
Increase in cash by 94,500
Explanation:
Asset reduction = Cash x %of factored amount
= 105,000 x 0.90 = <u>94,500 </u>cash increment
Receivables
(8,000 - 3% fee of total amount factored)
3% of total amount = 105,000 x 0.003 = 3,150
therefore, Receivables = 8,000 - 3,150
= 4,850
Therefore Net decrease = Cash - Cash Increment - Receivables
= 105,000 - 94,500 - 4,850
= 5,650
Therefore, decrease in asset is by <u>5,650</u>
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Income before income taxes decreases by $5,7650 which is loss on receivables sales ).