Treatment of NSF check;1. Exercise 6 ' 7A Treatment of NSF check;The bank statement of Stone Supplies included a $300 NSF check that one of the Stone's customers had written to pay for services that were provided by Stone.;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;Asset = Liab. + Equity;Rev. ' Exp. = Net Inc.;Cash Flow;Cash + Accts Rec.;b. Is the recognition of the NSF check on Stone's books an asset source, use, or exchange transaction?;c. Suppose the customer redeems the check by giving Stone $325 cash in exchange for the bad check. The additional $25 paid a service fee charged by Stone. 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.
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