Palmona Co. establishes a $150 petty cash fund on January 1. On January 8, the fund shows $61 in cash along with receipts for the following expenditures: postage, $35; transportation-in, $14; delivery expenses, $16; and miscellaneous expenses, $24. Palmona uses the perpetual system in accounting for merchandise inventory.

Required:

a. Prepare journal entries to establish the fund on January 1.

b. Prepare journal entry to reimburse the petty cash fund on January 8.

c. Prepare journal entries to both reimburse the fund and increase it to $450 on January 8.

Question

Business

Karma Farmer

30 November, 23:58

Palmona Co. establishes a $150 petty cash fund on January 1. On January 8, the fund shows $61 in cash along with receipts for the following expenditures: postage, $35; transportation-in, $14; delivery expenses, $16; and miscellaneous expenses, $24. Palmona uses the perpetual system in accounting for merchandise inventory.

Required:

a. Prepare journal entries to establish the fund on January 1.

b. Prepare journal entry to reimburse the petty cash fund on January 8.

c. Prepare journal entries to both reimburse the fund and increase it to $450 on January 8.

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Answers (1)

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Terrell · Answer 1

Palmona Co Journal entries

1.

Jan-01

Dr Petty cash 150

Cr Cash 150

2.

Jan-08

Dr Postage expense 35

Dr Merchandise inventory 14

Dr Delivery expense 16

Dr Miscellaneous expenses 24

Cr Cash 89

3. Jan-08

Dr Postage expense 35

Dr Merchandise inventory 14

Dr Delivery expense 16

Dr Miscellaneous expenses 24

Cash 89

4.

Jan-08

Dr Petty cash 300

(450-150)

Cr Cash 300

Explanation:

1. To establish petty cash fund

2. To record reimbursement

3. To record reimbursement

4. To record increase in fund balance from 150 to 450