Question

Palmona Co. establishes a $140 petty cash fund on January 1. On January 8, the fund shows $31 in cash along w/ receipts for the following expenditures: postage, $49; transportation-in, $10; delivery expenses, $12; and miscellaneous expenses, $38. Palmona uses the perpetual system in accounting for merchandise inventory.Prepare journal entry to establish the fund on January 1, reimburse it on January 8, and reimburse the fund and increase it to $190 on January 8, assuming no entry in part 2. (Hint: make 2 separate entries for part 3).1) Record the journal entry to establish the petty cash fund.2) Record the reimbursement of the petty cash fund.3) Record the increase of the petty cash fund.

Answer 1

Answer and Explanation:

The journal entries are shown below:

1. Petty cash $140

           To Cash $140

(Being the petty cash fund is established)

2. Postage expenses Dr $49

Merchandise inventory Dr $10

Delivery expenses $12

Miscellaneous expenses $38

   To Petty cash A/c $109

(Being the expenses are recorded)

3.  Petty cash $50       ($190 - $140)

           To Cash $50

(Being the increase of the petty cash fund is recorded)

Only these entries are recorded