Cameron Co. established a $180 petty cash fund on January 1, 2020. One week later, on...

Cameron Co. established a $180 petty cash fund on January 1, 2020. One week later, on January 8, the fund contained $34.95 in cash and receipts for these expenditures: postage, $50.40; transportation-in, $32.40; store supplies, $39.35; and a withdrawal of $22.90 by Jim Cameron, the owner. Cameron uses the perpetual method to account for merchandise inventory.

a. Prepare the journal entry to establish the fund on January 1.

b. Prepare a summary of the petty cash payments and record the entry to reimburse the fund on January 8. (Round your answers to 2 decimal places.)

Analysis Component:

If the January 8 entry to reimburse the fund were not recorded and financial statements were prepared for the month of January, would profit be over- or understated?

multiple choice

Overstated
Understated

Expert Solution

Journal entries are as follows:

Date	Account and Explanation	Debit($)	Credit($)
January 1	Petty Cash	180
(a)	Cash		180
	(Recorded the petty cash)

January 8	Postage Expenses	50.40
(b)	Transportation-in	32.40
	store supplies	39.35
	Drawings (Withdrawals)	22.90
	Cash		145,05

c) If these expenses are not recorded then the profit margin will not deacrease, but it show more profit. Thefore, if the reimburse of the fund were not recorded then profit will ramain overstated.

ekkarill92 answered 4 months ago

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