In: Accounting
Slide 37-15
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 Lennos, 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. and accepted a noninterest-bearing note with a discount rate of 10%. The $8,000 payment is due on March 31, 2019.
Apr. 3. Sold merchandise to Carr Co. for $7,000 with terms 2/10, n/30. Evergreen uses the gross method to account for cash discounts.
11. Collected the entire amount due from Carr Co.
17. 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 receivables 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 Lennos, Inc., note at the bank. The bank’s discount rate is 12%. The note was discounted without recourse.
Sept. 30. Lennox, Inc., paid the note amount plus interest to the bank.
1. Accrued four months interest on the note receivable issued on February 28.
2. Discounted the Lennox, Inc., note at the bank. The bank’s discount rate is 12%. The note was discounted without recourse.
3. Lennox, Inc., paid the note amount plus interest to the bank.
4. Record accrued interest at December 31, 2018.
Required:
Date |
General Journal |
Debit |
Credit |
Prepare a schedule showing the effect of the journal entries on 2018 income before taxes. (Decreases should be indicated with a minus sign. Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)
Income |
|
Date |
Increase/Decrease |
February 28 |
|
March 31 |
|
April 3 |
|
April 11 |
|
April 17 |
|
April 17 |
|
April 30 |
|
June 30 |
|
June 30 |
|
December 31 |
|
Total effect |