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Chapter 6: 3PSB_3 (page 313)

Blues Music Center had the following petty cash transactions in March of the current year. March 5 Wrote a \(250 check, cashed it, and gave the proceeds and the petty cashbox to Jen Rouse, the petty cashier.

6 Paid \)12.50 COD shipping charges on merchandise purchased for resale, terms FOB shipping point. Blues uses the perpetual system to account for merchandise inventory.

11 Paid \(10.75 in delivery expense on merchandise sold to a customer, terms FOB destination.

12 Purchased office file folders for \)14.13 that are immediately used.

14 Reimbursed Bob Geldof, the manager, \(11.65 for office supplies purchased and used.

18 Purchased office printer paper for \)20.54 that is immediately used.

27 Paid \(45.10 COD shipping charges on merchandise purchased for resale, terms FOB shipping point.

28 Paid postage expense of \)18.

30 Reimbursed Geldof \(56.80 for mileage expense.

31 Cash of \)61.53 remained in the fund. Sorted the petty cash receipts by accounts affected and

exchanged them for a check to reimburse the fund for expenditures.

31 The petty cash fund amount is increased by \(50 to a total of \)300.

Required

3. Prepare the journal entries (in dollars and cents) for part 2 to both (a) reimburse and (b) increase the fund amount

Short Answer

Expert verified

Answer

(a) Journal entry is passed for reimbursement in step 2

(b) Petty cash fund is increased by $50, and the journal entry is passed in step 2

Step by step solution

01

Step-by-Step SolutionStep 1: Introduction to topic

Petty cash- A petty cash fund always hasa little amount of money, which is used to pay minor expenses of the business. Petty cash is a current asset and should be recorded on the company balance sheet.

02

Journal entries for part (a) and (b)-

Date

Transactions

Debit($)

Credit($)

Mar. 31(a)

Delivery Expense

10.75



Mileage Expense

56.80



Postage Expense

18.00



Merchandise Inventory

57.60



Office Supplies Expense

46.32



Cash Over and Short


1.00


Cash


188.47


To reimburse the petty cash fund.







Mar. 31(b)

Petty Cash

50.00



Cash


50.00


To increase the petty cash fund.



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Most popular questions from this chapter

List the seven broad principles of internal control.

The following information is available to reconcile Severino Co.’s book balance of cash with its bank statement cash balance as of December 31, 2017.

a. The December 31 cash balance according to the accounting records is \(32,878.30, and the bank statement cash balance for that date is \)46,822.40.

b. Check No. 1273 for \(4,589.30 and Check No. 1282 for \)400, both written and entered in the accounting records in December, are not among the canceled checks. Two checks, No. 1231 for \(2,289 and

No. 1242 for \)410.40, were outstanding on the most recent November 30 reconciliation. Check No. 1231 is listed with the December canceled checks, but Check No. 1242 is not.

c. When the December checks are compared with entries in the accounting records, it is found that Check No. 1267 had been correctly drawn for \(3,456 to pay for office supplies but was erroneously entered in the accounting records as \)3,465.

d. Two memoranda are enclosed with the statement and are unrecorded at the time of the reconciliation. The first is for a \(762.50 charge that dealt with an NSF check for \)745 received from a customer, Titus Industries, in payment of its account. The bank assessed a \(17.50 fee for processing it. The second is \)99 in miscellaneous expenses for check printing.

e. The bank statement shows that the bank collected \(19,000 cash on a note receivable for the company, deducted a \)20 collection expense, and credited the balance to the company’s Cash account. Severino did not record this transaction before receiving the statement.

f. Severino’s December 31 daily cash receipts of $9,583.10 were placed in the bank’s night depository on that date but do not appear on the December 31 bank statement.

Required

Analysis Component

3. Explain the nature of the communications conveyed by a bank when the bank sends the depositor (a) a debit memorandum and (b) a credit memorandum.

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

What internal control procedures would you recommend in each of the following situations?

1. A concession company has one employee who sells towels, coolers, and sunglasses at the beach. Each day, the employee is given enough towels, coolers, and sunglasses to last through the day and enough cash to make change. The money is kept in a box at the stand.

Barga Co. reported net sales for 2016 and 2017 of \(730,000 and \)1,095,000, respectively. Its year-end balances of accounts receivable follow: December 31, 2016, \(65,000; and December 31, 2017, \)123,000.

a. Compute its days’ sales uncollected at the end of each year. Round the number of days to one decimal.
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