Q.1 On December 15, 2019, Minz Company sold merchandise inventory to the Pro Company on credit $22,500 with the term of 60 days. The monthly effective interest rate is 2%. If Minz Company sold this merchandise inventory in cash, it would collect $21,627. Minz Company has collected its receivable on February 15, 2020. Use the effective interest rate method to allocate the interest through the term. The number of days in a month is assumed as 30 days.

Required:

a. Prepare the journal entries at the dates of December 15, 2019, December 31, 2019, January 15, 2020, and February 15, 2020.

b. Prepare the partial Income Statement for the year 2019 and Balance Sheet as of December 31, 2019.