While preparing its bank reconciliation,Maynard Company determined that its bank had collected a $650 account receivable for the company and deducted a $25 collection fee.Which of the following shows the effect of this transaction on the financial statements?

A)Option A
B)Option B
C)Option C
D)Option D

Question

While preparing its bank reconciliation,Maynard Company determined that its bank had collected a $650 account receivable for the company and deducted a $25 collection fee.Which of the following shows the effect of this transaction on the financial statements?

A)Option A 
B)Option B 
C)Option C 
D)Option D

Quizplus · Accepted Answer

The entry to record receipt of the receivable,less the bank's collection fee,increases assets (cash)by $625 and decreases assets (accounts receivable)by $650;thus total assets decrease by $25.Stockholders' equity (retained earnings)decreases by the same amount.The transaction increases expenses by $25,which decreases net income.The net cash received of $625 is reported as a cash inflow for operating activities.

While Preparing Its Bank Reconciliation,Maynard Company Determined That Its Bank