Miscellaneous receivable transactions
Mark company sell lawn and garden products to wholesalers. The company's fiscal year -end is December 31. During 2011, the following transaction related to receivables occurred:
Feb 28 Sold merchandise to Brisk,Inc for $10,000 and accepted a 10% 7 month note. 10% is an appropriate rate for this type of note.
March 31 Sold merchandise to Madd Co. and accepted a noninterest-bearing note with a discount rate 10%. The $8,000 payment is due on March 31,2012.
April 3 Sold merchandiseto Car Co. for $7,000 with terms 2/10,n/30.Evergreen uses the gross method to account for cash discounts.
April 11 Collected the entire amount due from Car Co.
April 17 A customer returned merchandise costing $3,200. Mark 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.
April 30 Tranfered receivables of $50,000 to a factor without recourse. The factor charged Mark company a 1% finance charge on the receivables transferred. The sale criteria are met.
June 30 Discounted the Brisk, Inc note at the bank. The bank's discount rate is 12%. The note was discounted without recourse.
August 31 Brisk,Inc., paid the note amount plus interest to the bank.
Required
- Prepare the necessary journal entries for Mark Company for each of the dates listed in the problem. For transactions involving the sale of merchandise, ignore the entry for the cost of goods sold (round all calculations to the nearest dollar).
- Prepare any necessary adjusting entries at December 31, 2011. Adjusting entries are only recorded at year-end (round all calculations to the nearest dollar).
- Prepare a schedule showing the effect of the journal entries in requirements 1 and 2 on 2011 income before taxes.