Question

Nakashima Gallery had the following petty cash transactions in February of the current year. Feb. 2 Wrote a $340 check, cashed it, and gave the proceeds and the petty cashbox to Chloe Addison, the petty cashier. 5 Purchased bond paper for the copier for $15.55 that is immediately used. 9 Paid $40.50 COD shipping charges on merchandise purchased for resale, terms FOB shipping point. Nakashima uses the perpetual system to account for merchandise inventory. 12 Paid $7.35 postage to express mail a contract to a client. 14 Reimbursed Adina Sharon, the manager, $66 for business mileage on her car. 20 Purchased stationery for $67.77 that is immediately used. 23 Paid a courier $18 to deliver merchandise sold to a customer, terms FOB destination. 25 Paid $10.60 COD shipping charges on merchandise purchased for resale, terms FOB shipping point. 27 Paid $59 for postage expenses. 28 The fund had $25.38 remaining in the petty cash box. Sorted the petty cash receipts by accounts affected and exchanged them for a check to reimburse the fund for expenditures. 28 The petty cash fund amount is increased by $70 to a total of $410. Required:1. Prepare the journal entry to establish the petty cash fund.2. Prepare a petty cash payments report for February with these categories: delivery expense, mileage expense, postage expense, merchandise inventory (for transportation-in), and office supplies expense. Sort the payments into the appropriate categories and total the expenditures in each category.3. Prepare the journal entries for required 2 to both (a) reimburse and (b) increase the fund amount.

Answer 1

Requirement 1

The journal entry to create a petty cash fund is as:

Date	Particulars	Debit	Credit
Feb 02	Petty Cash	$340
	To Cash		$340
	(To establish petty cash fund)

Requirement 2

                                                                Nakashima Gallery

Petty cash Payments report

For the month of February

Date	Particulars	Amount	Amount
	Delivery expense
Feb 23	Delivery of customers merchandise		$18.00
	Mileage expense
Feb 14	Reimbursement for mileage		$66.00
	Postage expense
Feb 12	Express delivery of contract	$7.35
Feb 27	Purchase of postage stamps	$59	$66.35
	Merchandise Inventory (for transportation-in)
Feb 09	COD charges on purchases	$40.50
Feb 25	COD charges on purchases	$10.60	$51.10
	Office supplies expense
Feb 5	Purchased paper for copier	$15.55
Feb 20	Purchased stationery	$67.77	$83.32
	TOTAL		$284.77

Requirement 3

Date	Particulars	Debit	Credit
Feb 28	Delivery expense	$18.00
	Mileage expense	$66.00
	Postage Expense	$66.35
	Merchandise inventory	$51.10
	Office supplies expense	$83.32
	Cash over and short (to balance)	$29.85
	To cash (340-25.38)		$314.62
	(To record reimbursement for petty cash expense)
Feb 28	Petty Cash	$70.00
	To cash		$70.00
	(To record increment of petty cash fund)