Question

Problem 7-21 Establishing, reimbursing, and increasing the petty cash fund LO4 Halifax Fitness Consulting completed the following petty cash transactions during February 2020: 5. Catherine Young records all incoming customer cash receipts for her 2 Prepared a $360 cheque, cashed it, and gave the proceeds and the petty cash box to Nick Reed, the petty the company has not bonding insurance premium by dropping the bone tomer payments to their accounts. Feb. cashier 5 Purchased paper for the copier, $22 9 Paid $38 COD charges on merchandise purchased for resale. Assume Halifax Fitness Consulting uses the perpetual method to account for merchandise inventory. 12 Paid $17 postage to express mail a contract to a client. 14 Reimbursed Kim Marin, the manager of the business, $148 for business auto expenses. 20 Purchased stationery, $65. 23 Paid a courier $8 to deliver merchandise sold to a customer. 25 Paid $20 COD charges on merchandise purchased for resale. 28 Paid $24 for stamps. 28 Reed sorted the petty cash receipts by accounts affected and exchanged them for a cheque to reimburse the fund for expenditures. However, there was only $11 in cash in the fund. In addition, the size of the petty cash fund was increased to $500 Required 1. Prepare a journal entry to record establishing the petty cash fund. 2. Prepare a summary of petty cash payments, similar to Exhibit 7.3 that has these categories: delivery ex- pense, auto expense, postage expense, merchandise inventory, and office supplies. Sort the payments into the appropriate categories and total the expenditures in each category. 3. Prepare the journal entry to record the reimbursement and the increase of the fund.

Answer 1

1.

Date	Particulars	Debit $	Credit $
1-Feb	Petty Cash	360
	Cash		360
	(To record create a petty cash fund.)

2.

Particulars	Amount in $
Delivery expense	8
Auto expense	148
Postage expense	17
Merchandise inventory (38+20)	58
Office supplies expense (22+65+24)	111
Total expenduture	342

3.

Particulars	Amount in $
Petty Cash fund Balance at beginning	360
Less: Total Cash Paid	342
Petty Cash fund Balance (As per books of records)	18
Less: Actual Petty cash balance at end of the month	11
Cash Short (over)	7

Date	General Journal	Debit $	Credit $
28-Feb	Delivery expense	8
	Auto expense	148
	Postage expense	17
	Merchandise inventory	58
	Office supplies expense	111
	Cash Short and Over	7
	Cash		349
	(To record the replenish a petty cash fund and arise cash short.)
28-Feb	Petty Cash	140
	Cash		140
	(To record increase the size of the petty cash fund.) (500-360)