Question

Exercise 8-9 Petty cash fund with an overage LO P2 EcoMart establishes a $1,050 petty cash fund on May 2. On May 30, the fund shows $326 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 $5 overage 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 [Hint: Credit Cash Over and Short for $5 and credit Cash for $724], and (3) June 1 entry to increase the fund to $1,200.

Answer 1

Answer:

1. May 2

Petty cash $1,050

Cash $1,050

2.May 30

Dr Merchandise inventory $120

Dr Postage Expense $369

Dr Miscellaneous expenses $240

Cr Cash over and short $5

Cr Cash $724

3. June 1

Petty Cash $150

Cash $150

Explanation:

1. Preparation of the May 2 entry to establish the funds

May 2

Petty cash $1,050

Cash $1,050

(Being to establish the funds)

2. Preparation of May 30 entry to reimburse the fund

May 30

Dr Merchandise inventory $120

Dr Postage Expense $369

Dr Miscellaneous expenses $240

Cr Cash over and short $5

Cr Cash $724

($120+$369+$240-$5)

(Being to reimburse the fund )

3. Preparation of June 1 entry to increase the fund to $1,200.

June 1

Petty Cash $150

Cash $150

($1,200-$1,050)

(Being to increase the fund)