![Connect Access Card For Financial Accounting Fundamentals](https://www.bartleby.com/isbn_cover_images/9781260482829/9781260482829_smallCoverImage.jpg)
Concept explainers
1.
Journalize the petty cash fund transactions in the books of Corporation M.
1.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Petty cash fund: Petty cash fund is a fund established to pay insignificant amounts like postage, office supplies, and lunches.
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in
stockholders’ equity accounts. - Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
Journalize the establishment of petty cash fund transaction on January 3.
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
January | 3 | Petty Cash | 150.00 | |||
Cash | 150.00 | |||||
(Record establishment of petty cash fund) |
Table (1)
Description:
- Petty Cash is an asset account. Since cash is deposited in the petty cash account, asset value is increased, and an increase in asset is debited.
- Cash is an asset account. The amount has decreased because cash is transferred to Petty Cash account. The asset is decreased, and a decrease in asset is credited.
Journalize the replenishment of petty cash fund transaction on January 14.
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) | ||
January | 14 | Office Supplies Expenses | 14.29 | |||
Merchandise Inventory | 19.60 | |||||
Repairs Expense | 38.57 | |||||
Miscellaneous Expenses | 12.82 | |||||
Cash Short and Over | 2.44 | |||||
Cash | 87.72 | |||||
(Record replenishment of petty cash fund) |
Table (2)
- Office Supplies Expense is an expense account. Expenses decrease value of stockholders’ equity account, and a decrease in equity is debited.
- Merchandise Inventory is an asset account. Transportation-in charges are related to merchandise, so these expenses are charged to merchandise inventory in perpetual inventory system. Hence, value of asset is increased, and an increase in asset is debited.
- Repairs Expense is an expense account. Expenses decrease value of stockholders’ equity account, and a decrease in equity is debited.
- Miscellaneous Expense is an expense account. Expenses decrease value of stockholders’ equity account, and a decrease in equity is debited.
- Cash Short and Over is a stockholders’ equity account. The increase (overage) is credited and decrease (shortage) is debited. Hence, debit Cash Short and Over account with $2.44 indicating less amount of cash balance.
- Cash is an asset account. Since the expenditures are recognized from petty cash fund petty cash is decreased, and a decrease in asset is credited.
Working Notes:
Calculate cash spent.
Calculate cash short and over amount.
Step 1: Calculate the total of expenses.
Particulars | Amount ($) |
Office Supplies Expenses | 14.29 |
Merchandise Inventory | 19.60 |
Repairs Expense | 38.57 |
Miscellaneous Expenses | 12.82 |
Total expenses | $85.28 |
Table (3)
Step 2: Calculate the cash and short over amount.
Note: Refer to Equation (1) and Table (3) for values and computations of amount of cash spent and total expenses.
Journalize the increase in petty cash fund transaction on January 15.
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
January | 15 | Petty Cash | 50 | |||
Cash | 50 | |||||
(Record increased amount of petty cash fund) |
Table (4)
Description:
- Petty Cash is an asset account. Since cash is deposited in the petty cash account, asset value is increased, and an increase in asset is debited.
- Cash is an asset account. The amount has decreased because cash is transferred to Petty Cash account. The asset is decreased, and a decrease in asset is credited.
Journalize the replenishment of petty cash fund transaction on January 31.
Date | Account Titles and Explanations | Post. Ref. | Debit ($) | Credit ($) | ||
January | 31 | Advertising Expense | 50.00 | |||
Postage Expenses | 48.19 | |||||
Delivery Expense | 78.00 | |||||
Cash Short and Over | 6.46 | |||||
Cash | 182.65 | |||||
(Record replenishment of petty cash fund) |
Table (5)
- Postage Expense is an expense account. Expenses decrease value of stockholders’ equity account, and a decrease in equity is debited.
- Mileage Expense is an expense account. Expenses decrease value of stockholders’ equity account, and a decrease in equity is debited.
- Delivery Expense is an expense account. Expenses decrease value of stockholders’ equity account, and a decrease in equity is debited.
- Cash Short and Over is a stockholders’ equity account. The increase (overage) is credited and decrease (shortage) is debited. Hence, debit Cash Short and Over account with $6.46 indicating less amount of cash balance.
- Cash is an asset account. Since the expenditures are recognized from petty cash fund petty cash is decreased, and a decrease in asset is credited.
Working Notes:
Calculate cash spent.
Calculate cash short and over amount.
Step 1: Calculate the total of expenses.
Particulars | Amount ($) |
Advertising Expense | $50.00 |
Postage Expense | 48.19 |
Delivery Expense | 78.00 |
Total expenses | $176.19 |
Table (6)
Step 2: Calculate the cash and short over amount.
Note: Refer to Equation (2) and Table (6) for values and computations of amount of cash spent and total expenses.
Journalize the increase in petty cash fund transaction on January 31.
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | ||
January | 31 | Petty Cash | 50 | |||
Cash | 50 | |||||
(Record increased amount of petty cash fund) |
Table (7)
Description:
- Petty Cash is an asset account. Since cash is deposited in the petty cash account, asset value is increased, and an increase in asset is debited.
- Cash is an asset account. The amount has decreased because cash is transferred to Petty Cash account. The asset is decreased, and a decrease in asset is credited.
2.
Explain the effect of petty cash being not replenished on January 31, on the financial statements of Corporation M.
2.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Effect: If the entry for replenishment of petty cash fund is not recorded, the petty expenses of $182.65 (Equation (2)), for which cash is paid would not be included in the net income and
Want to see more full solutions like this?
Chapter 6 Solutions
Connect Access Card For Financial Accounting Fundamentals
- Direct materials price variancearrow_forward$ 36,000 204,000 The Drysdale, Koufax, and Marichal partnership has the following balance sheet immediately prior to liquidation: Cash Noncash assets Liabilities Drysdale, loan $ 50,000 10,000 Total assets $ 240,000 Drysdale, capital (50%) Koufax, capital (30%) Marichal, capital (20%) Total liabilities and capital 70,000 60,000 50,000 $ 240,000 Required: a-1. Determine the maximum loss that can be absorbed in Step 1. Then, assuming that this loss has been incurred, determine the next maximum loss that can be absorbed in Step 2. a-2. Liquidation expenses are estimated to be $15,000. Prepare a predistribution schedule to guide the distribution of cash. b. Assume that assets costing $74,000 are sold for $60,000. How is the available cash to be divided? Complete this question by entering your answers in the tabs below.arrow_forwardCalculate GP ratio round answers to decimal placearrow_forward
- What is the gross profit percentage for this periodarrow_forwardThe company's gross margin percentage is ?arrow_forwardProblem 19-13 (Algo) Shoney Video Concepts produces a line of video streaming servers that are linked to personal computers for storing movies. These devices have very fast access and large storage capacity. Shoney is trying to determine a production plan for the next 12 months. The main criterion for this plan is that the employment level is to be held constant over the period. Shoney is continuing in its R&D efforts to develop new applications and prefers not to cause any adverse feelings with the local workforce. For the same reason, all employees should put in full workweeks, even if that is not the lowest-cost alternative. The forecast for the next 12 months is MONTH FORECAST DEMAND January February March April 530 730 830 530 May June 330 230 July 130 August 130 September 230 October 630 730 800 November December Manufacturing cost is $210 per server, equally divided between materials and labor. Inventory storage cost is $4 per unit per month and is assigned based on the ending…arrow_forward
- Compute 007s gross profit percentage and rate of inventory turnover for 2016arrow_forwardHeadland Company pays its office employee payroll weekly. Below is a partial list of employees and their payroll data for August. Because August is their vacation period, vacation pay is also listed. Earnings to Weekly Vacation Pay to Be Employee July 31 Pay Received in August Mark Hamill $5,180 $280 Karen Robbins 4,480 230 $460 Brent Kirk 3,680 190 380 Alec Guinness 8,380 330 Ken Sprouse 8,980 410 820 Assume that the federal income tax withheld is 10% of wages. Union dues withheld are 2% of wages. Vacations are taken the second and third weeks of August by Robbins, Kirk, and Sprouse. The state unemployment tax rate is 2.5% and the federal is 0.8%, both on a $7,000 maximum. The FICA rate is 7.65% on employee and employer on a maximum of $142,800 per employee. In addition, a 1.45% rate is charged both employer and employee for an employee's wages in excess of $142,800. Make the journal entries necessary for each of the four August payrolls. The entries for the payroll and for the…arrow_forwardThe direct materials variance is computed when the materials are purchasedarrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
![Text book image](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)