Question

Exercise 6-8 Petty cash fund with a shortage LO P2 Waupaca Company establishes a $350 petty cash fund on September 9. On September 30, the fund shows $104 in cash along with receipts for the following expenditures: transportation-in, $40; postage expenses, $123; and miscellaneous expenses, $80. The petty cashier could not account for a $3 shortage in the fund. The company uses the perpetual system in accounting for merchandise inventory. Prepare (1) the September 9 entry to establish the fund, (2) the September 30 entry to reimburse the fund, and (3) an October 1 entry to increase the fund to $400.

Answer 1

Answer:

1.September 09

Dr Petty cash 350

Cr Cash 350

2. September 30

Dr Merchandise inventory 40

Dr Postage expense 123

Dr Miscellaneous expenses 80

Dr Cash short and over 3

Cr Cash 246

3. Dr Petty cash 50

Cr Cash 50

Explanation:

Preparation of Journal entries

1. Preparation of September 9 Journal entry to establish the fund

September 09

Dr Petty cash 350

Cr Cash 350

2. Preparation of September 30 Journal entry to reimburse the fund

September 30

Dr Merchandise inventory 40

Dr Postage expense 123

Dr Miscellaneous expenses 80

Dr Cash short and over 3

Cr Cash 246

(40+123+80+3)

3. Preparation of October 1 Journal entry to increase the fund to $400.

October 01

Dr Petty cash 50

Cr Cash 50

($400-$350)