Question

Cassie Company's bank statement contained a $75 service charge. Which of the following shows how recognizing this charge will affect Cassie's financial statements?

A. 75 + NA = NA + 75 75 - NA = 75 75 OA
B. (75) + NA = NA + (75) NA - 75 = (75) NA
C. (75) + NA = NA + (75) NA - 75 = (75) (75) OA
D. (75) + 75 = NA + NA NA - NA = NA (75) OA

Answer 1

The $75 service charge will affect Cassie Company's financial statements by increasing expenses and decreasing cash, which is shown as Option B in the provided choices. It reflects proper accounting for decreasing assets and increasing expenses.

Step-by-step explanation:

When Cassie Company recognizes the $75 bank service charge, it will affect the company's financial statements by reducing both the bank account balance (an asset) on the balance sheet and the cash at the bank on the company's books. The correct journal entry to record this would be a debit to Bank Service Charge Expense (increasing an expense) and a credit to Cash (decreasing an asset), adhering to the double-entry bookkeeping system. Based on the options provided, the correct option that shows how recognizing this charge will affect Cassie's financial statements is:

Option B: (75) + NA = NA + (75) NA - 75 = (75) NA

This option corresponds to increasing the bank service charge expense by $75 and reducing the cash account by $75, which reflects the decrease in company assets due to the bank service charge.