3)3. Prepare a schedule showing the effect of the journal entries in requirements 1 and 2 on 2006 income before taxes Evergreen Company sell lawn and gardenproducts to wholesalers. The company's fiscal year-end is December31. During 2006, the following transactions related to receivablesoccurred: Feb. 28 Sold merchandise to Lennox, Inc. for $10,000 andaccepted a 10%, 7 month note. 10% is an appropriate rate for thistype of note. Mar. 31 Sold merchandise to Maddox Co. and accepted anoninterest-bearing note with a discount rate of 10%. The $8,000payment is due on March 31,2007. Apr. 3 Sold merchandise to Carr Co. for $7,000 withterms 2/10, n/30. Evergreen uses the gross method to account forcash discounts. Apr. 11 Collected the entire amount due from CarrCo. Apr. 17 A customer returned merchandise costing $3,200.Evergreen reduced the customer's receivable balance by $5,000, thesales price of the merchandise. Sales returns are recorded by thecompany as they occur. Apr. 30 Transferred receivables of $50,000 to a factorwithout recourse. The factor charged Evergreen a 1% finance chargeon the receivables transferred. The sale criteria are met. June 30 Discounted the Lennox, Inc., note at the bank,The bank's discount rate is 12%. The note was discounted withoutrecourse. Aug. 31 Lennox, Inc,. paid the note amount plus interestto the bank