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

question 22

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:

Schedule A

A tax form used for itemizing deductions, such as medical expenses, taxes paid, interest, gifts to charity, and casualty losses.

Medical Expenses

Unreimbursed costs for healthcare services, treatments, or products that may be deductible if they exceed a certain portion of the taxpayer's adjusted gross income.

Birth Control Pills

Medication taken orally to prevent pregnancy, often considered a qualified medical expense for health savings accounts.

Deductible Interest

Interest payments on loans (such as mortgage or student loans) that can be subtracted from gross income to reduce taxable income under certain circumstances.