Evergreen Company sells lawn and garden products to wholesalers. The company's fiscal yearend is December During the
following transactions related to receivables occurred:
February Sold merchandise to Lennox, Incorporated, for $ and accepted a month note. is an
appropriate rate for this type of note.
March Sold merchandise to Maddox Company that had a fair value of $ and accepted a noninterestbearing
note for which $ payment is due on March
April Sold merchandise to Carr Company for $ with terms Evergreen uses the gross method to
account for cash discounts.
April Collected the entire amount due from Carr Company
April A customer returned merchandise costing $ Evergreen reduced the customer's receivable balance by
$ the sales price of the merchandise. Sales returns are recorded by the company as they occur.
April Transferred receivables of $ to a factor without recourse. The factor charged Evergreen a finance
charge on the receivables transferred. The sale criteria are met.
June Discounted the Lennox, Incorporated, note at the bank. The bank's discount rate is The note was
discounted without recourse.
September Lennox, Incorporated, paid the note amount plus interest to the bank.
Required:
Prepare the necessary journal entries for Evergreen for each of the above dates. For transactions involving the sale of
merchandise, ignore the entry for the cost of goods sold.
Prepare any necessary adjusting entries at December Adjusting entries are only recorded at yearend.
Prepare a schedule showing the effect of the journal entries on income before taxes.
Answer is complete but not entirely correct.
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Prepare a schedule showing the effect of the journal entries on income before taxes.
Note: Decreases should be indicated with a minus sign.
