P $7-10$

Miscellaneous

receivable

transactions;

financial statement effects

LO$7-3,$ LO$7-4,$ LO$7-7,$ LO$7-8$

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:

Feb. $28$

Sold merchandise to Lennox, Inc., for $$10,000$ and accepted a $10\%,7-$month note. $10\%$ is an appropriate rate for this type of note.

Mar. $31$ Sold merchandise to Maddox Co$.$ that had a fair value of $$7,200,$ and accepted a noninterestbearing note for which $$8,000$ payment is due on March $31,2025.$

Sold merchandise to Carr Co$.$ for $$7,000$ with terms $\frac{2}{10},\frac{n}{30}.$ Evergreen uses the gross method to account for cash discounts.

Collected the entire amount due from Carr Co$.$

A customer returned merchandise costing $$3,200.$ Evergreen reduced the customer's receivable balance by $$5,000,$ the sales price of the merchandise. Sales returns are recorded by the company as they occur.

$30$ Transferred recelvables of $$50,000$ 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, Inc., note at the bank. The bank's discount rate is $12\%.$ The note was discounted without recourse.

Sep. $30$ Lennox, Inc., 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 $($round all calculations to the nearest dollar$).$

Prepare any necessary adjusting entries at December $31,2024.$ Adjusting entries are only recorded at yearend $($round all calculations to the nearest dollar$).$

Prepare a schedule showing the effect of the journal entries in requirements $1$ and $2$ on $2024$ income before taxes.