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Financial & Managerial Accounting
Found in: Page 312
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Moya Co. establishes a petty cash fund for payments of small amounts. The following transactions involving the petty cash fund occurred in January (the last month of the company’s fiscal year).Jan. 3 A company check for $150 is written and made payable to the petty cashier to establish the petty cash fund.14 A company check is written to replenish the fund for the following expenditures made since January 3.

a. Purchased office supplies for $14.29 that are immediately used up.

b. Paid $19.60 COD shipping charges on merchandise purchased for resale, terms FOB shipping point. Moya uses the perpetual system to account for inventory.

c. Paid $38.57 to All-Tech for repairs expense to a computer.

d. Paid $12.82 for items classified as miscellaneous expenses.

e. Counted $62.28 remaining in the petty cashbox.

15 Prepared a company check for $50 to increase the fund to $200.

31 The petty cashier reports that $17.35 remains in the fund. A company check is written to replenish the fund for the following expenditures made since January 14.

f. Paid $50 to The Smart Shopper in advertising expense for January’s newsletter.

g. Paid $48.19 for postage expenses.

h. Paid $78 to Smooth Delivery for delivery expense of merchandise, terms FOB destination.

31 The company decides that the January 15 increase in the fund was too little. It increases the fund by another $50, leaving a total of $250.

Required

1. Prepare journal entries (in dollars and cents) to establish the fund on January 3, to replenish it on January 14 and January 31, and to reflect any increase or decrease in the fund balance on January 15 and 31.

Analysis Component

2. Explain how the company’s financial statements are affected if the petty cash fund is not replenished and no entry is made on January 31

Answer

When petty cash is increased, then it is debited

When there are certain expenses, then they are debited, and cash is credited while making payment of these expenses

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Introduction to topic-

Petty Cash- Petty cash refers to a limited quantity of hard cash that an organization will keep close by to pay for miscellaneous and unexpected things, for example, team lunches or office snacks.

Step 2: Journals-

Date

Transaction

Debit($)

Credit($)

Jan. 3

Petty Cash

150.00

Cash

150.00

To establish the petty cash fund.

Jan. 14

Office Supplies Expense

14.29

Merchandise Inventory*

19.60

Repairs Expense—Computer

38.57

Miscellaneous Expenses

12.82

Cash Over and Short

2.44

Cash

87.72

To reimburse the petty cash fund.

Jan. 15

Petty Cash

50.00

Cash

50.00

To increase the petty cash fund.

Jan. 31

Advertising Expense

50.00

Postage Expenses

48.19

Delivery Expense

78.00

Cash Over and Short

21.46

Cash

157.65

To reimburse the petty cash fund.

Jan 31

Petty Cash

50.00

Cash

50.00

To increase the petty cash fund.

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