Evergreen Company sells lawn and garden products to wholesalers.

Week Three Assignment Intermediate I
P7-10
Miscellaneous receivable transactions
Evergreen Company sells lawn and garden
products to wholesalers. The company’s
fiscal year-end is December 31. During
2011, the following transactions related to receivables occurred:
Feb. 28
Sold merchandise to Lennox, 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 31,2012.
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 Lennox, Inc. note at the bank. The bank’s discount rate is 12%. The note was discounted without recourse.
Aug. 31
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. The transaction involving the sale of
merchandise, ignore the entry for the cost of goods sold (round all
calculations to the nearest dollars).
2. Prepare
any necessary adjusting entries at December 31, 2011. Adjusting entries are only recorded at
year-end (round all calculations to the nearest dollar).
3. Prepare
a schedule showing the effect of the journal entries in requirements 1 and 2 on
2011 income before taxes.

P
7-14 Bank Reconciliation and adjusting entries
El Gato Painting Company maintains a
checking account at American Bank. Bank
statements are prepared at the end of each month. The November 30, 2011, reconciliation of the
bank balance is as follows:
Balance per
bank, November 30
Add: Deposits
outstanding
3,231
Less: Checks
outstanding
1,200
#363
123
#365
201
#380 56

#381
86
#382
340
Adjusted balance
per bank, November 30
(806)

3,625
The company’s
general ledger checking account showed the following for December:
Balance,
December 1
3,625
Receipts 42,650

Disbursements
(41,853)
Balance,
December 31 4,422
The December
bank statement contained the following information:
Balance, December
1
3,231
Deposits 43,000
Checks
processed
(41,918)
Service
charges (22)
NSF checks
(440)
Balance, December
31 3,851
The checks that
were processed by the bank in December include all of the outstanding checks at
the end of November except for check #365.
In addition, there are some December checks that had not been processed by
the bank by the end of the month. Also,
you discover that check #411 for $320.00 was correctly recorded by the bank but
was incorrectly recorded on the books as a $230 disbursement for advertising
expense. Included in the bank’s deposit
is a $1,300 deposit incorrectly credited to the company’s account. The deposit should have been posted to the
credit of the Los Gatos Company. The NSF
checks have no ben redeposited and the company will seek payment from the
customers involved.
Required:
1.
Prepare a bank reconciliation for the El
Gato checking account at December 31, 2011.
2.
Prepare any necessary adjusting journal
entries indicated.

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