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Evergreen Company sells lawn and garden products to wholesalers. The company's fiscal year-end is December 31. During 2018 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 2018 the following transactions related to receivables occurred Feb. 28 Sold merchandise to Lennox, Inc. for $40,000 and accepted a 68, 7-month note. 6% is an appropriate rate for Mar. 31 Sold merchandise to Maddox Co. and accepted a noninterest-bearing note with a discount rate of 6%. The Apr. 3 Sold merchandise to Carr Co. for $15,000 with terms 2/10, n/30. Evergreen uses the gross method to account this type of note. $30,000 payment is due on March 31, 2019 for cash discounts. 11 Collected the entire amount due from Carr Co 17 A customer returned merchandise costing $4,400. Evergreen reduced the customer's receivable balance by $6,200, the sales price of the merchandise. Sales returns are recorded by the company as they occur. charge on the receivables transferred. The sale criteria are met. without recourse. 30 Transferred receivables of $62,000 to a factor without recourse. The factor charged Evergreen a 1% finance June 30 Discounted the Lennox, Inc., note at the bank. The bank's discount rate is 8%. The note was discounted Sep. 30 Lennox, Inc., paid the note amount plus interest to the bank Required: 1. 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 2. Prepare any necessary adjusting entries at December 31, 2018. Adjusting entries are only recorded at year-end 3. Prepare a schedule showing the effect of the journal entries on 2018 income before taxes
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