A Cheque in the Amount of $425 Was Returned by the Bank

question 4

Multiple Choice

A cheque in the amount of $425 was returned by the bank marked "NSF".A bank service fee of $20 was charged for processing the returned cheque.Upon notification of the NSF, the company who initially received the customer's cheque will most likely

• A)reverse the customer's payment on their books to re-establish the accounts receivable for $425.
• B)make no changes to the accounting records but advise the customer that the payment was declined and is still outstanding.
• C)reverse the customer's payment on their books to re-establish the accounts receivable for $425 and debit bank charges expense for the bank service fee of $20.
• D)reverse the customer's payment on their books to re-establish the accounts receivable for $425 and debit the accounts receivable for the bank service fee of $20.

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Definitions:

Profit

The financial gain achieved when the revenue gained from a business activity exceeds the expenses, costs, and taxes associated with sustaining the activity.

Tenancy In Common

Joint ownership of property in which each party owns an undivided interest that passes to his or her heirs at death.

Heirs

Individuals legally entitled to receive a portion of a deceased person's estate.

Fee Simple

a type of estate in land, which provides the owner with the most complete form of ownership, including the right to use, lease, or sell the property.