Question

Montgomery Stationery’s bank statement contained a $260 NSF check that one of its customers had written to pay for supplies purchased.

Required
a. Show the effects of recognizing the NSF check on the financial statements by recording the appropriate amounts in a horizontal statements model like the following one:


b. Is the recognition of the NSF check on Montgomery’s books an asset source, use, or exchange transaction?
c. Suppose the customer redeems the check by giving Montgomery $290 cash in exchange for the bad check. The additional $30 paid a service fee charged by Montgomery. Show the effects on the financial statements in the horizontal statements model in Requirement a.
d. Is the receipt of cash referenced in Requirement c an asset source, use, or exchange transaction?
e. Record in general journal form the adjusting entry for the NSF check and the entry for redemption of the check by thecustomer.


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  • CreatedOctober 26, 2013
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