Exercise 6-7A (Algo) Treatment of NSF check LO 6-3

Hans Suppliess bank statement contained a $410 NSF check that one of its customers had written to pay for supplies purchased.

Required:

a. & c. Show the effects of the following transactions on the financial statements in the horizontal statements model. (a) Recognize the NSF check, (c) Customer redeems the check by giving Hans $430 cash in exchange for the bad check. The additional $20 was a service fee charged by Hans.

Note: Enter any decreases to account balances with a minus sign. For changes on the Statement of Cash Flows, indicate whether the item is an operating activity (OA), investing activity (IA), financing activity (FA), or leave the cell blank if there is no effect.

b. Is the recognition of the NSF check on Hans books an asset source, use, or exchange transaction?

multiple choice 1

Asset source

Asset use

Asset exchange

d. Select which of the following is the correct answer.

multiple choice 2

Asset exchange is $430.

Asset source is $430.

Asset use is $430.

Asset exchange is $410 and Asset source is $20.

Asset source is $410 and Asset use is $20.

Asset exchange is $430 and Asset use is $20.