Question

Setterstrom Company established a petty cash fund on May 1, cashing a check for $100. The company reimbursed the fund on June 1 and July 1 with the following results.

June 1: Cash in fund $1.75. Receipts: delivery expense $31.25, postage expense $39.00, and miscellaneous expense $25.00.
July 1: Cash in fund $3.25. Receipts: delivery expense $21.00, entertainment expense $51.00, and miscellaneous expense $24.75.

On July 10, Setterstrom increased the fund from $100 to $130.
Required:
Prepare journal entries for Setterstrom Company.

Answer 1

Answer:

Following are the journal entries for Setterstrom Company;

May 01

Debit: Petty cash  = $100.00

Credit: Cash = $100.00

Jun 01

Debit: Delivery Expense  = $31.25

Debit: Postage Expense  = $39.00

Debit: Miscellaneous Expense  = $25.00

Debit: Cash over/short (Balance amount)  = $3.00

Credit: Petty Cash ($100 - $1.75)  = $98.25

Jul 01

Debit: Delivery expense  = $21.00

Debit: Entertainment expense = $51.00

Debit: Miscellaneous expense = $24.75

Credit: Petty Cash ($100 - $3.25) =  $96.75

Jul 10

Debit: Petty cash  = $30.00

Credit: Cash = $30.00

Answer 2

The preparation of the journal entries to record the petty cash transactions for Setterstrom Company is as follows:

Journal Entries:

May 1: Debit Petty cash $100

Credit Cash $100

June 1: Debit Delivery Expense $31.25

Debit Postage Expense $39.00

Debit Miscellaneous Expense $25.00

Debit Cash Shortage $3.00

Credit Petty Cash $98.25

Debit Petty Cash $98.25 ($100 - $1.75)

Credit Cash $98.25

July 1: Debit Delivery expense $21.00

Debit Entertainment expense $51.00

Debit Miscellaneous expense $24.75

Credit Petty Cash $96.75

July 10: Debit Petty cash $126.75

Credit Cash $126.75

Transaction Analysis:

May 1: Petty cash $100 Cash $100

June 1: Delivery Expense $31.25 Postage Expense $39.00 Miscellaneous Expense $25.00 Cash Shortage $3.00 Petty Cash $98.25

Petty Cash $98.25 ($100 - $1.75) Cash $98.25

July 1: Delivery expense $21.00 Entertainment expense $51.00 Miscellaneous expense $24.75 Petty Cash $96.75

July 10: Petty cash $126.75 Cash $126.75

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