Montgomery Stationerys bank statement contained a $420 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 Montgomery $440 cash in exchange for the bad check. The additional $20 was a service fee charged by Montgomery. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity and NA to indicate the element is not affected by the event. (Enter any decreases to account balances and cash outflows with a minus sign.)

b.

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

	Asset source
	Asset use
	Asset exchange

d.

Select which of the following is the correct answer.

	Asset exchange is 440.
	Asset source is 440.
	Asset use is 440.
	Asset exchange is 420 and Asset source is 20.
	Asset source is 420 and Asset use is 20.
	Asset exchange is 440 and Asset use is 20.