Question

Palmona Co. establishes a $200 petty cash fund on January 1. On January 8, the fund shows $38 in cash along with receipts for the following expenditures: postage, $74; transportation-in, $29; delivery expenses, $16; and miscellaneous expenses, $43. Palmona uses the perpetual system in accounting for merchandise inventory. Prepare journal entries to (1) establish the fund on January 1, (2) reimburse it on January 8, and (3) both reimburse the fund and increase it to $450 on January 8, assuming no entry in part 2. (Hint: Make two separate entries for part 3.)

Answer 1

Answer:

The Journal entries are as follows:

(i) On January 1,

Petty cash A/c    Dr. $200

To cash                               $200

(To record the petty cash fund)

(ii) On January 8,

Postage expense A/c                 Dr. $74

Merchandise inventory A/c        Dr. $29

Delivery expense A/c                 Dr. $16

Miscellaneous expenses A/c     Dr. $43

To Cash                                                      $162

(To record receipts of the expenditures)

(iii) On January 8,

Petty cash A/c    Dr. $250

To cash                               $250

(To record the increase in petty cash fund)