Question

EcoMart establishes a $1,050 petty cash fund on May 2. On May 30, the fund shows $312 in cash along with receipts for the following expenditures: transportation-in, $120; postage expenses, $369; and miscellaneous expenses, $240. The petty cashier could not account for a $9 shortage in the fund. The company uses the perpetual system in accounting for merchandise inventory Prepare the (1) May 2 entry to establish the fund, (2) May 30 entry to reimburse the fund, and (3) June 1 entry to increase the fund to $1,200.

Answer 1

Answer:

See the explanation below:

Explanation:

(1) May 2 entry to establish the fund

Details                                              Dr ($)             Cr ($)  

Petty cash account                         1,050

Cash                                                                        1,050

To record the establishment of petty cash fund              

(2) May 30 entry to reimburse the fund

Details                                              Dr ($)             Cr ($)  

Transportation-in                             120

Postage expenses                          369

Miscellaneous expenses                240

Shortage of fund                                 9

Petty cash account                                                     738

To record petty cash transactions during May                      

Petty cash account                            738

Cash                                                                             738

To record the reimbursement of the petty cash fund.            

(3) June 1 entry to increase the fund to $1,200.

Additional amount to add = 1,200 - 1,050 = $150

The journal entries will be as follows:

Details                                              Dr ($)             Cr ($)  

Petty cash account                            150

Cash                                                                          150

To record the increase of the petty cash fund to N1,200