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 $20,000 and accepted a 6%, 7-month note. 6% is an appropriate rate for this type of note. Mar.   31   Sold merchandise to Maddox Co. that had a fair value of $15,040, and accepted a noninterest-bearing note for which $16,000 payment is due on March 31, 2022. Apr.   3   Sold merchandise to Carr Co. for $14,000 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 $4,800. Evergreen reduced the customer’s receivable balance by $6,600, the sales price of the merchandise. Sales returns are recorded by the company as they occur.     30   Transferred receivables of $66,000 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 8%. The note was discounted without recourse. Sep.   30   Lennox, Inc., paid the note amount plus interest to the bank. Required: 3. Prepare a schedule showing the effect of the journal entries on 2021 income before taxes.

Accounting
27th Edition
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Chapter21: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 21.18EX
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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 $20,000 and accepted a 6%, 7-month note. 6% is an appropriate rate for this type of note.

Mar.   31  

Sold merchandise to Maddox Co. that had a fair value of $15,040, and accepted a noninterest-bearing note for which $16,000 payment is due on March 31, 2022.

Apr.   3  

Sold merchandise to Carr Co. for $14,000 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 $4,800. Evergreen reduced the customer’s receivable balance by $6,600, the sales price of the merchandise. Sales returns are recorded by the company as they occur.
    30   Transferred receivables of $66,000 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 8%. The note was discounted without recourse.

Sep.   30   Lennox, Inc., paid the note amount plus interest to the bank.


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

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
%24
Transcribed Image Text: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 %24
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