Nakashima Gallery had the following petty cash transactions in February of the current year. Nakashima uses the perpetual system to account for merchandise inventory. Feb. 2 Wrote a $350 check to establish a petty cash fund. 5 Purchased paper for the copier for $16.55 that is immediately used. 9 Paid $40.50 shipping charges (transportation-in) on merchandise purchased for resale, terms FOB shipping point. These costs are added to merchandise inventory. 12 Paid $7.45 postage to deliver a contract to a client. 14 Reimbursed Adina Sharon, the manager, $73 for mileage on her car. 20 Purchased office paper for $69.77 that is immediately used. 23 Paid a courier $22 to deliver merchandise sold to a customer, terms FOB destination. 25 Paid $11.20 shipping charges (transportation-in) on merchandise purchased for resale, terms FOB shipping point. These costs are added to merchandise inventory. 27 Paid $55 for postage expenses. 28 The fund had $25.78 remaining in the petty cashbox. 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 $110 to a total of $460. 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. 3. Prepare the journal entries for required 2 to both (a) reimburse and (b) increase the fund amount. Complete this question by entering your answers in tho tn

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Nakashima Gallery had the following petty cash transactions in February of the current year. Nakashima uses the perpetual system to
account for merchandise inventory.
Feb. 2 Wrote a $350 check to establish a petty cash fund.
5 Purchased paper for the copier for $16.55 that is immediately used.
9 Paid $40.50 shipping charges (transportation-in) on merchandise purchased for resale, terms FOB shipping point.
These costs are added to merchandise inventory.
12 Paid $7.45 postage to deliver a contract to a client.
14 Reimbursed Adina Sharon, the manager, $73 for mileage on her car.
20 Purchased office paper for $69.77 that is immediately used.
23 Paid a courier $22 to deliver merchandise sold to a customer, terms FOB destination.
25 Paid $11.20 shipping charges (transportation-in) on merchandise purchased for resale, terms FOB shipping point.
These costs are added to merchandise inventory.
27 Paid $55 for postage expenses.
28 The fund had $25.78 remaining in the petty cashbox. 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 $110 to a total of $460.
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.
3. Prepare the journal entries for required 2 to both (a) reimburse and (b) increase the fund amount.
Complete this question by entering your answers in tho tn

Expert Solution

Step 1

Petty cash refers to a special fund created by a business in order to meet the regular petty expenses. The business sets aside a small amount and hands it over either to a person or puts it in a locker box so that incidental expenses are met. This amount is usually set aside for a small period and is re-established as soon as the petty cash amount lapses.

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