Question

Palmona Co. establishes a $250 petty cash fund on January 1. On January 8, the fund shows $145 in cash along with receipts for the following expenditures: postage, $43; transportation-in, $14; delivery expenses, $16; and miscellaneous expenses, $32. Palmona uses the perpetual system in accounting for merchandise inventory.
1. Prepare journal entry to (1) establish the fund on January 1.
2. Prepare journal entry to re-imburse it on January 8.
3. Prepare journal entries to both re-imburse the fund and increase it to $300 on January 8, assuming no entry in part 2.

Answer 1

Answer: Please see answer in explanatory column

Explanation:

1) Journal entry to establish the fund on January 1st.

Account                    Debit                      Credit

Petty Cash                $250

Cash                                                            $250

2) journal entry to record re-imbursement   on January 8.

Account                                 Debit                    Credit

Postage expense                $43

Merchandised inventory     $14

Delivery Expense                 $16

miscellaneous expenses,   $32

Cash                                                                    $105

3) journal entries to record reimbursement of  the fund and increment to $300 on January 8

Account                    Debit                      Credit

Petty Cash                $150

Cash                                                           $150

Petty cash increasing to $300, therefore the increased amount

$300- $250= $150