Question

Learning Objective 4 P7-26A Accounting for petty cash transactions Suppose that on June 1, Rockin' Gyrations, a disc jockey service, creates a petty cash fund with an imprest balance of $300. During June, Michael Martell, fund custodian, signs the following petty cash tickets: 2. June 30, Cash CR $160 Petty Cash Ticket Number Item Amount Postage for package received Office party Two boxes of stationery Printer cartridges Business dinner On June 30, prior to replenishment, the fund contains these tickets plus cash of $140. The accounts affected by petty cash payments are Office Supplies, Entertainment Expense, and Postage Expense. Requirements 1. On June 30, how much cash should this petty cash fund hold before it is replenished? 2. Journalize all required entries to (a) create the fund and (b) replenish it. Include explanations. 3. Make the entry on July 1 to increase the fund balance to $325. Include an explanation.

Please explain your answer. Thank you!

Answer 1

Requirement 1:

Before replenishment, the petty cash fund should hold cash of $145

Calculations:

Fund balance		$300
Postage expense	$30
Office expense	$25
Stationery expense	$20
Printing expense	$15
Business expense	$65
Total tickets		$155
Petty cash fund balance before replenish		$145

Requirement 2:

	Date	Account title and explanation	Debit	Credit
a	Jun 1	Petty cash	$300
		Cash		$300
		[To open the petty cash fund]
b	June 30	Postage expense	$30
		Office expense	$25
		Stationery expense	$20
		Printing expense	$15
		Business expense	$65
		Cash short & over	$5
		Cash		$160
		[To replenish the petty cash fund]

Calculations:

Fund balance		$300
Cash on hand	$140
Total tickets	$155	$295
Cash short & over		$5

Requirement 3:

Date	Account title and explanation	Debit	Credit
July 1	Petty cash [325-300]	$25
	Cash		$25
	[To increase the petty cash fund]