Question

Childers Company, which uses a perpetual inventory system, has an established petty cash fund in the amount of $500. The fund was last reimbursed on November 30. At the end of December, the fund contained the following petty cash receipts:
December 4 - Freight charge for merchandise purchased - $ 61
December 7 - Delivery charge for shipping to customer - $ 85
December 12 - Purchase of office supplies - $ 50
December 18 - Donation to charitable organization - $ 69
If, in addition to these receipts, the petty cash fund contains $227.25 of cash, the journal entry to reimburse the fund on December 31 will include:
a. A debit to Petty Cash of $111.
b. A credit to Cash Over and Short of $7.75.
c. A credit to Cash of $272.75.
d. A credit to Office Supplies of $85.
e. A debit to Transportation-In of $111.

Answer 1

Answer:

c. A credit to Cash of $272.75.

Explanation:

These transactions can be explained with the help of T- Account .

         Cash            

Debit                   Credit  

                         Bal $ 500

Freight $61

Shipping

Charges  $ 85

Supplies  $ 50

Donation  $ 69

Suspense   7.75

Fund     $ 227.25                    

                        Fund   $ 227.25

              Reimbursement $272.75

                                            $ 500  

As there is shortage of $ 272.25 in the amount of $ 500 the petty cash will be reimbursed with this amount.

An amount of $ 7.75 is short  which is dealt in suspense account and reimbursed with the amount falling short.