Exercise 7-6 On June 3, Sheridan Company sold to Chester Arthur merchandise having a sale price of $3,400 with terms 3/10, n/60, f.o.b. shipping point. A $83 invoice, terms n/30, was received by Chester on June 8 from John Booth Transport Service for the freight cost. When it received the goods on June 5, Chester notified Sheridan that $540 of the merchandise contained flaws that rendered it worthless; the same day, Sheridan Company issued a credit memo covering the worthless merchandise and asked that it be returned to them at their expense. The freight on the returned merchandise was $29, which Sheridan paid on June 7. On June 12, the company received a cheque for the balance due from Chester Arthur. 1. Prepare journal entries on Sheridan Companys books assuming that sales and receivables are entered at gross selling price. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.) 2.Prepare journal entries on Sheridan Companys books assuming that sales and receivables are entered net of cash discounts. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.) 3.Prepare the journal entry assuming that sales and receivables are entered net of cash discounts, if Chester Arthur did not pay until July 29. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) 4.From Chester Arthurs perspective, calculate the implied annual interest rate on accounts receivable not paid to Sheridan within the discount period. Chester Arthur has a line of credit facility with its bank at 10%. (Round answer to 2 decimal places, e.g. 12.52%. Use 365 days for calculation.)