Kiona co. set up a petty cash fund for payments of small amounts. the following transactions involving the petty cash fund occurred

Kiona co. set up a petty cash fund for payments of small amounts. the following transactions involving the petty cash fund occurred in may (the last month of the company's fiscal year). may 1 prepared a company check for $350 to establish the petty cash fund. 15 prepared a company check to replenish the fund for the following expenditures made since may 1. a. paid $109.20 for janitorial services. b. paid $89.15 for miscellaneous expenses. c. paid postage expenses of $60.90. d. paid $80.01 to the county gazette (the local newspaper) for an advertisement. e. counted $26.84 remaining in the petty cashbox. 16 prepared a company check for $200 to increase the fund to $550. 31 the petty cashier reports that $380.27 cash remains in the fund. a company check is drawn to replenish the fund for the following expenditures made since may 15. f. paid postage expenses of $59.10. g. reimbursed the office manager for business mileage, $47.05. h. paid $48.58 to deliver merchandise to a customer, terms fob destination. 31 the company decides that the may 16 increase in the fund was too large. it reduces the fund by $50, leaving a total of $500.

Answers

1-May

Dr Petty cash 350

Cr Cash 350

15-May

Dr Janitorial services 109.20

Dr Miscellaneous 89.15

Dr Postage expense 60.90

Dr Advertisement expense 80.01

Cr Cash over and short 16.1

Cr Cash 323.16

16-May

Dr Petty cash 200

Cr Cash 200

31-May

Dr Postage expense 47.05

Dr Mileage expense 38.5

Dr Delivery expense 48.58

Cr Cash 134.13

31-May

Dr Cash 50

Cr Petty cash 50

Explanation:

Kiona Co Journal entries

1-May

Dr Petty cash 350

Cr Cash 350

15-May

Dr Janitorial services 109.20

Dr Miscellaneous 89.15

Dr Postage expense 60.90

Dr Advertisment expense 80.01

Cr Cash over and short 16.1

Cr Cash 323.16

(350-26.84)

16-May

Dr Petty cash 200

Cr Cash 200

31-May

Dr Postage expense 47.05

Dr Mileage expense 38.5

Dr Delivery expense 48.58

Cr Cash 134.13

31-May

Dr Cash 50

Cr Petty cash 50

a. Prepare journal entries to establish the fund on May 1, to replenish it on May 15 and on May 31, and to reflect any increase or decrease in the fund balance on May 16 and May 31.

May 1, petty cash fund is established:

Dr Petty cash fund 300

    Cr Cash 300

May 15, petty cash fund expenses:

Dr Janitorial services expenses 93.60

Dr Miscellaneous expenses 76.41

Dr Postage expenses 52.20

Dr Advertisement expenses 68.58

    Cr Cash short and over 13.80

    Cr Petty cash fund 276.99

May 15, petty cash fund is replenished

Dr Petty cash fund 276.99

    Cr Cash 276.99

May 16, petty cash fund increases:

Dr Petty cash fund 200

    Cr Cash 200

May 31, petty cash fund expenses:

Dr Postage expenses 53.73

Dr Travel expenses 42.78

Dr Freight expenses 44.17

Dr Cash short and over 20

    Cr Petty cash fund 160.68

May 31, petty cash fund is replenished

Dr Petty cash fund 160.68

    Cr Cash 160.68

May 31, petty cash fund decreases:

Dr Cash 50

    Cr Petty cash fund 50

b. Explain how the company's financial statements are affected if the petty cash fund is not replenished and no entry is made on May 31.

If the petty cash fund is not replenished and the related expenses are not recorded, then the company's net income will be overstated since some expenses will not have been properly accounted for. Also, cash will be overstated in the balance sheet, as well as retained earnings.

Explanation:


Kiona co. set up a petty cash fund for payments of small amounts. the following transactions involvi

Kiona Co.

Journal Entries:

May 1:

Debit Petty Cash Fund $300

Credit Cash Account $300

To record the establishment of the petty cash fund.

May 15:

Debit Janitorial Services $93.60

Debit Miscellaneous Expenses $76.41

Debit Office Supplies $52.20

Debit Advertisement $68.58

Credit Petty Cash Fund $290.79

May 15:

Debit Petty Cash Fund $290.79

Credit Cash Account $290.79

To record the replenishment of the fund.

Debit Cash Account $13.80

Credit Surplus Cash $13.80

To record the excess cash counted.

May 16:

Debit Petty Cash Fund $200

Credit Cash Account $200

To record the increase of the fund to $500.

May 31:

Debit Office Stationery $53.73

Debit Transport $42.78

Debit Delivery Expense $44.17

Credit Petty Cash Fund $140.68

May 31:

Debit Petty Cash Fund $140.68

Credit Cash Account $140.68

To replenish the petty cash fund.

Debit Cash Account $50

Credit Petty Cash Fund $50

To record the reduction of the petty cash fund by $50.

Explanation:

A Petty Cash Fund is a system for meeting small-ticket expenses, by the use of the float system.  This implies that the petty cashier is only reimbursed for actual expenditure in order to restore the float to the established amount.

The petty cash balance is prepared as follows:

Explanation:

                   The Petty Cash Book for Kiona Co.

Date           Purchase                                  Amount($)     Balance ($)

                   Check                                                300                 300

                   Janitorial services                               88                  212

                   Miscellaneous expenses                    53.68             158.32

                   Postage expenses                               53.5               104.82

                   Country Gazette                                   47.15                57.57

                   Balance as counted                               -                     62.15

                   Company check                                  200                 262.15

                   Balance as reported                              -                     288.20

                   Postage expenses                               147.36              140.84          

                   Reimbursement                                      23.5               117.34

                   Deliveries                                                34.75               82.59

                   Balance at month-end                             -                      82.59

                   Balance for June 1st                                 -                    400

                   Float for June                                            -                    482.59

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