Treatment of NSF checkThe bank statement of Zone Supplies included a $200 NSF check that o...

Treatment of NSF check

The bank statement of Zone Supplies included a $200 NSF check that one of Zone’s customers had written to pay for services that were provided by Zone.

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 Zone’s books an asset source, use or exchange transaction?

c.Suppose the customer redeems the check by giving Zone $225 cash in exchange for the bad check. The additional $25 paid a service fee charged by Zone. Show the effects on the financial statements in the horizontal statements model in Requirement a.

d.Is the receipt of cash referred to 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 subsequent entry for redemption of the check by the customer.