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The bank statement of Gear Supplies included a $300 NSF check that one of Gear’s customers had written to pay for services that were provided by Gear Required a Show the effects of recognizing the

The bank statement of Gear Supplies included a $300 NSF check that one of Gear’s customers had written to pay for services that were provided by Gear.

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.

Assets

=

Liab.

+

Equity

Rev.

-

Exp.

=

Net Inc.

Cash Flow

Cash

+

Accts. Rec.

 

                 
                         

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

c. Suppose the customer redeems the check by giving Gear $325 cash in exchange for the bad check. The additional $25 paid a service fee charged by Gear. 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?

May 12 2020 Read more Less More

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