Question

Task#2 Petty Cash. Bank Reconciliation) Jonni Jones is reviewing the cash accounting for London, Inc, a local hair salon Jones review will focun on de pt cash accoumt and the bank reconciliation for the month ended September 30, 2020 She bas collected he following information from London's bookkeeper for this task Petty Cash The petty cash fund was established on September 2, 2020, in the amount of 5300. 2. Expenditures from the fund by the custodian as of September 30, 2020,, were evidenced by approved receipts for the following Postage expense $61.50 Mailing labels and other supplies LOU. from employees 33.00 25.00 Shipping charges Newspaper advertising Miscellaneous expense 79.36 38.00 12.80 On September 30, 2020, the petty cash fund was replenished and increased to $400, currency and coin in the fund at that time totaled $52.34 Bank Reconciliation ALPHA STATE BANK Bank Statement Balance Receipts Disbursements $12,637 Balance, September 1, 2020 Deposits Note payment direct from customer (interest of $45) Checks cleared during May Bank service charges Balance, September 30, 2020 $35,000 1,585 $36,900 20 12,302 London's Cash Account Balance, September 1, 2020 Deposits during September 2020 Checks written during September 2020 $12,172 36,200 (37,450) Deposits in transit are determined to be S1,560, and checks outstanding at September 30 total $1,800. Cash on hand (besides petty cash) at September 30, 2020, is $425. Instructions a) Prepare the journal entries to record the transactions related to the petty cash fund for September. b) Prepare a bank reconciliation dated September 30, 2020, proceeding to a correct cash balance. c) Prepare the journal entries necessary to make the books correct and complete. d) What amount of cash should be reported in the September 30, 2020, balance sheet?

Answer 1

Requirement a: Prepare the following journal entries

Date	Account Title and Explanation	Debit	Credit
Sept. 2	Petty Cash	$300
	Cash		$300
	To record petty cash fund established
Sept. 30	Postage Expense	$61.50
	Supplies	$33.00
	Accounts Receivable (I.O.U)	$25.00
	Freight-out	$79.36
	Advertising Expense	$38.00
	Miscellaneous Expense	$12.80
	Cash Short and Over		$2.00
	Cash ($300 − $52.34)		$247.66
	To replenish petty cash fund
Sept. 30	Petty Cash	$100
	Cash		$100
	To record the increase in petty cash fund

Requirement b: Prepare the bank reconciliation as follows

L Inc
Bank Reconciliation
September 30, 2020
Balances per bank		$12,302
Add:
Cash on hand	$425
Deposit in transit	$1,560	$1,985
		$14,287
Deduct:
Checks outstanding		$1,800
Correct cash balance, September 30		$12,487
Balance as per books ($12,172 + $36,200 − $37,450)		$10,922
Add:
Note receivable collected including interest		$1,585
		$12,507
Deduct
Bank service charges		$20
Correct cash balance, September 30		$12,487

Requirement c: Prepare the following journal entries

Date	Account Title and Explanation	Debit	Credit
Sept. 30	Cash	$1,585
	Notes Receivable		$1,540
	Interest Revenue		$45
	To record notes receivable collected including interest
Sept. 30	Office Expense	$20
	Cash		$20
	To record bank service charges

Requirement d: The amount of cash to be reported in balance sheet is $12,887 ($12,487 + $400)