Review the following T accounts, and then scroll down to complete the Cash Short and Over T account and answer the associated question that follows it. Cash Balance 1/1/Y5 5,500 1/2/Y5 Establish Petty Cash 500 1/5/Y5 2,800     1/12/Y5 6,305     1/23/Y5 3,270     1/30/Y5 4,450     Balance 21,825

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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You’ve just been hired as an accountant at the Murdstone Co., a retailer of supplies for arts and crafts. Since the previous accountant left his position suddenly, the controller of Murdstone Co. has asked for your assistance in filling in some missing data for the company’s January accounting records. You’ll also be responsible for training the company’s new accounting intern.
 
Chart of Accounts
 
 
CHART OF ACCOUNTS
Murdstone Co.
General Ledger
  ASSETS
110 Cash
111 Petty Cash
112 Accounts Receivable
115 Merchandise Inventory
117 Office Supplies
118 Prepaid Insurance
120 Land
123 Store Equipment
124 Accumulated Depreciation-Store Equipment
125 Office Equipment
126 Accumulated Depreciation-Office Equipment
  LIABILITIES
210 Accounts Payable
211 Salaries Payable
212 Unearned Rent
213 Customer Refunds Payable
215 Notes Payable
  EQUITY
310 Edward Murdstone, Capital
311 Edward Murdstone, Drawing
  REVENUE
410 Sales
610 Rent Revenue
  EXPENSES
510 Cost of Merchandise Sold
516 Cash Short and Over
520 Sales Salaries Expense
521 Advertising Expense
522 Depreciation Expense-Store Equipment
523 Delivery Expense
529 Miscellaneous Selling Expense
530 Office Salaries Expense
531 Rent Expense
532 Depreciation Expense-Office Equipment
533 Insurance Expense
534 Office Supplies Expense
539 Miscellaneous Administrative Expense
710 Interest Expense
 
 
Cash Short and Over
 
 
The controller has completed the T accounts for the Cash and Sales accounts as of January 30, but needs to attend an important conference in another city. She has requested that you prepare the T account for the Cash Short and Over account as of January 30 also. You are told that the balance of the account is zero as of the beginning of January, and that all the company’s sales are in cash.
Review the following T accounts, and then scroll down to complete the Cash Short and Over T account and answer the associated question that follows it.
Cash
Balance 1/1/Y5 5,500 1/2/Y5 Establish Petty Cash 500
1/5/Y5 2,800    
1/12/Y5 6,305    
1/23/Y5 3,270    
1/30/Y5 4,450    
Balance 21,825    
Sales
    Balance 1/1/Y5 0
    1/5/Y5 2,805
    1/12/Y5 6,295
    1/23/Y5 3,320
    1/30/Y5 4,400
    Balance 16,820
 
Review the T accounts previously shown, and then complete the Cash Short and Over T account and the following associated question.
Cash Short and Over
Balance 1/1/Y5 0 1/12/Y5  
 
1/5/Y5  
 
1/30/Y5  
 
1/23/Y5  
 
   
    Balance
 
 
What will happen to the ending balance in the Cash Short and Over account at the end of the accounting period?
 
a. The discrepancy must be reported to the Securities and Exchange Commission.
 
b. It will be a miscellaneous expense on the income statement.
 
c. It will be added to the Other revenue section of the income statement.
 
d. The discrepancy must be reported on the company website.
 
 
 
Petty Cash
 
 
Murdstone Co. issued a check on January 2 to establish a petty cash fund of $500. On January 31, the amount of cash in the petty cash fund is $442. The company would like to issue a check to replenish the fund, based on the following summary of petty cash receipts:
Account
Amount on Receipt
Office Supplies $28.00
Miscellaneous Administrative Expense 23.00
 
The company’s policy is to record any missing funds in the Cash Short and Over account.
The new intern has prepared a proposed journal entry to record the replenishing of the petty cash fund:
PAGE 17
 
JOURNAL
ACCOUNTING EQUATION
 
  DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY
1
Jan. 31
Petty Cash
 
51.00
 
 
 
2
 
Cash
 
 
51.00
 
 
 
 
 
Prepare for your discussion with the intern by creating the corrected journal entry for the replenishment of the petty cash fund. Refer to the Chart of Accounts for exact wording of account titles.
PAGE 17
 
JOURNAL
ACCOUNTING EQUATION
 
  DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY
1
 
 
 
 
 
 
 
 
2
 
 
 
 
 
 
 
 
3
 
 
 
 
 
 
 
 
4
 
 
 
 
 
 
 
 
 
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