Question

Problem 6-3A) Etablishing, recordursing, and increasing petty cash Nakashima Gallery had the following petty cash transactions in February of the current year. Nakashima uses the perpetual system to account for merchandise inventory. Feb. 2 Wrote a $400 check to establish a petty cash fund. 5 Purchased paper for the copier for $14.15 that is immediately used. 9 Paid $32.50 shipping charges (transportation-in) on merchandise purchased for resale, terms FOB shipping point. These costs are added to merchandise inventory. 12 Paid $7.95 postage to deliver a contract to a client. 14 Reimbursed Adina Sharon, the manager, $68 for mileage on her car. 20 Purchased office paper for $67.77 that is immediately used. 23 Paid a courier $20 to deliver merchandise sold to a customer, terms FOB destination. 25 Paid $13.10 shipping charges transportation-in) on merchandise purchased for resale, terms FOB shipping point. These costs are added to merchandise inventory 27 Paid $54 for postage expenses. 28 The fund had $120.42 remaining in the petty cashbox. Sorted the petty cash receipts by ac- counts affected and exchanged them for a check to reimburse the fund for expenditures. 28 The petty cash fund amount is increased by $100 to a total of $500. Required 1. Prepare the journal entry to establish the petty cash fund. 2. Prepare a petty cash payments report for February with these categories: delivery expense, mileage expense, postage expense, merchandise inventory (for transportation-in), and office supplies expense. . Prepare the journal entries for part 2 to both (a) reimburse and (b) increase the fund amount. ck Cash credit $279,58(30) $100.00 3

Answer 1

1. Journal Entry for establishing Petty cash fund

Date Particulars Debit     Credit

Feb 2 Petty cash A/c 400

To Cash A/c   400

( Being petty cash fund was established )

2.

Petty cash report for the month of February
Cash Received	CB folio	Date	Description	Total Payment	Delivery Expense	Mileage Expense	Postage Expense	Merchandise Inventory	Office supplies expense	Misc exp
400		Feb-02	Cash A/c
		Feb-05	Paper copier	14.15					14.15
		Feb-09	Shipping Charges	32.5				32.5
		Feb-12	Postage	7.95			7.95
		Feb-14	Reimbursement of adina sharaon expenses	68		68
		Feb-20	Office paper	67.77					67.77
		Feb-23	Courier	20	20
		Feb-25	Shipping charges	13.1				13.1
		Feb-27	Postage Expenses	54			54
		Feb-28	Misc exp	2.11						2.11
		Feb-28	By balance c/d	120.42
				400	20	68	61.95	45.6	81.92	2.11
120.42		Mar-01	By balance b/d
379.58		Mar-01	Cash A/c(Reimbursement expense and amount increased by 100

In the above report the expense of $ 2.11 was treated as Misc. expense because no information was provided regarding that amount

3(a). Reimbursement of petty expenses

Petty cash A/c Dr 279.58

To Cash A/c 279.58

(Being petty cash expenses reimbursed )

3(b). Increase of petty cash fund

Petty cash A/c Dr 100

To Cash A/c 100

(Being petty cash limit was increased by 100 )