Question

Problem 6-24B Petty cash fund The following data pertain to the petty cash fund of Marsh Company: 1. The petty cash fund was established on an imprest basis at $250 on March 1. 2. On March 31, a physical count of the fund disclosed $13 in currency and coins, vouchers authoriz- ing meal allowances totaling $120, vouchers authorizing purchase of postage stamps of $21, and vouchers for payment of delivery charges of $93. Required a. Prepare all general journal entries necessary to (1) establish the fund, (2) reimburse employees, and (3) recognize the expenses and replenish the fund as of March 31. (Hint: Journal entries may not be required for all three events.) b. Explain how the Cash Short and Over account required in this case affects the income statement. c. Identify the event depicted in each journal entry recorded in Requirement a as asset source (AS). asset use (AU), asset exchange (AE), or claims exchange (CE). d. Show the effects on the financial statements of the events in Requirement a using a horizontal statements model like the following one. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an account was not affected by the event. Assets - Llab. + Equity Rev. - Exp. - Net Inc. Cash Flow Cash + Petty Cash

Answer 1

a. Journal entries:

	Date	Account title and explanation	Debit	Credit
(1)	Mar 1	Petty cash	$250
		Cash		$250
		[To open the petty cash fund]
(2)	Mar 31	No entry
(3)	Mar 31	Meal expense	$120
		Postage stamps expense	$21
		Delivery expense	$93
		Cash short & Over	$3
		Cash		$237
		[To replenish the petty cash fund]

Calculations:

Fund balance		$250
Cash on hand	$13
Petty cash tickets	$234
Total accounted for		($247)
Amount of cash missing		$3

b.

Cash Short and Over reported on the income statement as Other Expenses

c.

Entry 1 : Asset Exchange

Entry 3 : Asset Use

d.

Assets	=	Liab. + Equity	Rev.	-	Exp.	=	Net Inc.	Cash Flow
Cash + Petty Cash					$247		($247)	OA