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Evergreen Company sells lawn and garden products to wholesalers. The company's fiscal year-end is December 31. During 2024, the following transactions related to receivables occurred:
Evergreen Company sells lawn and garden products to wholesalers. The company's fiscal year-end is December 31. During 2024, the following transactions related to receivables occurred:
February 28 | Sold merchandise to Lennox, Incorporated, for $30,000 and accepted a 8%, 7-month note. 8% is an appropriate rate for this type of note. |
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March 31 | Sold merchandise to Maddox Company that had a fair value of $20,240, and accepted a noninterest-bearing note for which $22,000 payment is due on March 31, 2025. |
April 3 | Sold merchandise to Carr Company for $20,000 with terms 210/210 , n30/n30 . Evergreen uses the gross method to account for cash discounts. |
April 11 | Collected the entire amount due from Carr Company |
April 17 | A customer returned merchandise costing $4,300. Evergreen reduced the customers receivable balance by $6,100, the sales price of the merchandise. Sales returns are recorded by the company as they occur. |
April 30 | Transferred receivables of $61,000 to a factor without recourse. The factor charged Evergreen a 1% finance charge on the receivables transferred. The sale criteria are met. |
June 30 | Discounted the Lennox, Incorporated, note at the bank. The banks discount rate is 10%. The note was discounted without recourse. |
September 30 | 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 31, 2024. Adjusting entries are only recorded at year-end.
- Prepare a schedule showing the effect of the journal entries on 2024 income before taxes.
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