Question

Han’s Supplies’ bank statement contained a $180 NSF check that one of its customers had written...

Han’s Supplies’ bank statement contained a $180 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: (In the Cash Flow column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity and NA to indicate the element is not affected by the event. Enter any decreases to account balances with a minus sign.)

HAN’S SUPPLIES

Statements Model

Assets

=

Liabilities

+

Stockholders' Equity

Revenue

Expense

=

Net Income

Cash Flow

Cash

+

Accounts Receivable

b.

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

  

Asset source

Asset use

Asset exchange

c.


Suppose the customer redeems the check by giving Han $200 cash in exchange for the bad check. The additional $20 paid a service fee charged by Han. Show the effects on the financial statements in the horizontal statements model. (In the Cash Flow column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity and NA to indicate the element is not affected by the event. Enter any decreases to account balances with a minus sign.)

HAN’S SUPPLIES

Statements Model

Assets

=

Liabilities

+

Stockholders' Equity

Revenue

Expense

=

Net Income

Cash Flow

Cash

+

Accounts Receivable

d.

Is the receipt of cash referenced in Requirement c an asset source, use, or exchange transaction?

$180 Asset source, $20 Asset use

$200 Asset use, $20 Asset source

$180 Asset use, $20 Asset exchange

$200 Asset exchange, $20 Asset source

$180 Asset exchange, $20 Asset source

$180 Asset source, $20 Asset exchange

e.

Record in general journal form the adjusting entry for the NSF check and the entry for redemption of the check by the customer. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)


Journal entry worksheet

Note: Enter debits before credits.

Transaction a: record entry for recognizing the NSF check.

Transaction

General Journal

Debit

Credit

a.


Journal entry worksheet

Note: Enter debits before credits.

Transaction c: record the entry for redemption of check by the customer by giving $200 in cash to Han which includes an additional $20 service fee.

Transaction

General Journal

Debit

Credit

c.

Homework Answers

Answer #1
a
HAN’S SUPPLIES
Statements Model
Assets Liabilities Stockholders' Equity Revenue Expense Net Income Cash Flow
Cash Accounts Receivable
-180 180 -180 OA
b
Asset exchange
c
HAN’S SUPPLIES
Statements Model
Assets Liabilities Stockholders' Equity Revenue Expense Net Income Cash Flow
Cash Accounts Receivable
200 -180 20 20 20 200 OA
d
$180 Asset exchange, $20 Asset source
e
a Accounts Receivable 180
        Cash 180
c Cash 200
      Accounts Receivable 180
      Miscellaneous income 20
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