Question

Evergreen Company sells lawn and garden products to wholesalers. The company’s fiscal year-end is December 31. During 2016, the following transactions related to receivables occurred:

  

Feb. 28		Sold merchandise to Lennox, Inc. for $20,000 and accepted a 12%, 7-month note. 12% 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 12%. The $15,000 payment is due on March 31, 2017.
Apr. 3		Sold merchandise to Carr Co. for $12,000 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 $5,100. Evergreen reduced the customer’s receivable balance by $6,900, the sales price of the merchandise. Sales returns are recorded by the company as they occur.
30		Transferred receivables of $69,000 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 14%. 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.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)

• 1

  Sold merchandise to Lennox, Inc. for $20,000 and accepted a 12%, 7-month note. 12% is an appropriate rate for this type of note.

• 2

  Sold merchandise to Maddox Co. and accepted a noninterest-bearing note with a discount rate of 12%. The $15,000 payment is due on March 31, 2017.

• 3

  Sold merchandise to Carr Co. for $12,000 with terms 2/10, n/30. Evergreen uses the gross method to account for cash discounts.

• 4

  Collected the entire amount due from Carr Co.

• 5

  Evergreen reduced the customer’s receivable balance by $6,900, the sales price of the merchandise. Sales returns are recorded by the company as they occur.

• 6

  A customer returned merchandise costing $5,100.

• 7

  Transferred receivables of $69,000 to a factor without recourse. The factor charged Evergreen a 1% finance charge on the receivables transferred. The sale criteria are met.

• 8

  Accrued four months of interest on the note receivable issued on February 28.

• 9

  Discounted the Lennox, Inc., note at the bank. The bank’s discount rate is 14%. The note was discounted without recourse.

• 10

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

Record accrued interest at December 31, 2016.

Answer 1

Correct amounts have been answered

Journal entry

cash = 20000 + [20000*12/100*7/12] = 21400 - [21400 *14/100*3/12] = 20651

loss on sale of note receivable = 20800 - 20651 = 149

2.

Journal entry:

Discount -------------------------1350

Interest revenue----------------------------------1350

[15000*12/100*9/12]

3.

April 30 = - 690

June 30 = 800

June 30 = -149

December 31 = 1350

Total = 34271