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Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition by Donald E. Kieso, Paul D. Kimmel, Jerry J. Weygandt

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EXERCISE 7-4

Purpose: (L.O. 5) This exercise reviews the journal entries involved with establishing and maintaining a petty cash fund.

The Kirmani Corporation makes most expenditures by check. The following transactions relate to an imprest fund established by the Kirmani Corporation to handle small expenditures on an expedient basis.

Transactions

May 4 Wrote a $100 check to establish the petty cash fund.

  • 6 Paid taxi $10 to deliver papers to a branch office.
  • 6 Purchased stamps, $19.
  • 8 Paid $15 for advertising posters.
  • 12 Paid $8 for coffee supplies.
  • 13 Paid $17 for office supplies.
  • 14 Paid bus charges of $18 to ship goods to a customer.
  • 15 Counted the remaining coins and currency in the fund, $12. Wrote a check to replenish the fund.

Instructions

  • (a) Record the transactions in general journal form.
  • (b) Answer the questions that follow.

Questions

  1. How much coin and currency should have been in the petty cash box at the end of the day on May 12? $____________
  2. How much coin and currency should have been in the petty cash box on May 15 before replenishment? $____________
  3. What was the balance in the Petty Cash ledger account on May 12? $_______________
  4. What was the balance in the Petty Cash ledger account at the end of the day, May 15? $_________________

TIP: In order to answer the last two questions, it would be helpful to post the journal entries to a T-account for Petty Cash.

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