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Palmona Co. establishes a $200 petty cash fund on January 1. On January 8, the fund shows $38 in cash along with receipts for the following expenditures: postage, $74; transportation-in, $29; delivery expenses, $16; and miscellaneous expenses, $43. Palmona uses the perpetual system in accounting for merchandise inventory.(1) Prepare journal entries to establish the fund on January 1.(2)Prepare journal entry to reimburse the petty cash fund on January 8.(3) Prepare journal entries to both reimburse the fund and increase it to $450 on January 8, assuming no entry in part 2.

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Answer:

The jounal entries are given below:

(1) Prepare journal entries to establish the fund on January 1.

Date             General Journal           Debit          Credit

1/1                    Petty Cash                  200

                           Cash                                             200

-The fund is established and the account petty cash is created by a cash transfer in it of 200$.

(2) Prepare journal entry to reimburse the petty cash fund on January 8

Date             General Journal                   Debit          Credit

1/8                 Postage                                   74

                    Transportation-In                     29

                    Delivery Expenses                   16

                    Miscellaneous Expenses         43

                    Petty Cash                                                   162

-All the mentioned expenses are debited and the total amount is credited from the petty cash account.

(3) Prepare journal entries to both reimburse the fund and increase it to $450 on January 8, assuming no entry in part 2.

Date             General Journal                   Debit          Credit

1/8                   Petty Cash                           250

                         Cash                                                        250

-The petty cash account is increase to $450 by debiting $250 in the account.

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