Reference no: EM133116371

Question - Evergreen Company sells lawn and garden products to wholesalers. The company's fiscal year-end is December 31. During 2021, the following transactions related to receivables occurred:

Feb. 28 Sold merchandise to Lennox, Inc., for $12,000 and accepted a 8%, 7-month note. 8% is an appropriate rate for this type of note.

Mar. 31 Sold merchandise to Maddox Co. that had a fair value of $7,636, and accepted a noninterest-bearing note for which $3,300 payment is due on March 31, 2022.

Apr. 3 Sold merchandise to Carr Co. for $T,300 with terms 3110, n/30. Evergreen uses the gross method to account for cash discounts.

Apr. 11 Collected the entire amount due from Carr Co.

Apr. 17 A customer returned merchandise costing $3,500. Evergreen reduced the customer's receivable balance by $5,300, the sales price of the merchandise. Sales returns are recorded by the company as they occur.

Apr. 30 Transferred receivables of $53,000 to a factor without recourse. The factor charged Evergreen 3 2% finance charge on the receivables transferred. The sale criteria are met.

June 30 Discounted the Lennon, Inc., note at the bank. The bank's discount rate is 10%. The note was discounted without recourse.

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, 2021. Adjusting entries are only recorded at year-end.

3. Prepare a schedule showing the effect of the journal entries on 2021 income before taxes.