Question

Marin Airline needs to send out one of its employees to Nunavut for three weeks to perform some repairs on some aircraft it owns. Some of the payments to be made for the supplies needed on the assignment will be paid from a petty cash fund. Marin issued a cheque in the amount of $800.00 to establish the fund. After a few days at the assignment, the employee returned the following vouchers and receipts along with a report that the fund had $71.60 left in cash. Marin decided to increase the petty cash fund to $1,000.00.

Martinez Supply prepares monthly financial statements. Listed below are some selected accounts and their balances at June 30. Adjustments generally are done monthly, but no adjustments have been made for the month of June, 2017. Martinez has a May 31 year end. Martinez Supply Unadjusted Trial Balance (partial) June 30, 2017 Debit Credit Prepaid Insurance $2,793 Supplies 630 Vehicles 32,280 Accumulated Depreciation - Vehicles $8,580 Notes Payable 22,560 Unearned Revenue 1,550 Rent Revenue 146,400 An analysis of the account balances by the company's bookkeeper provided the following additional information: 1. A two-year insurance policy was purchased on March 1, 2017 for $3,192. 2. A physical count of supplies revealed $290 on hand on June 30, 2017. 3. The note payable is for one year at an annual interest rate of 5%, dated June 1, 2017. 4. The vehicle is being depreciated at the rate of $2,640 per year. 5. The amount of rent received in advance that remains unearned at June 30, 2017 is $1,200. Using the additional information above, prepare the adjusting entries that should be made by the Martinez Supply on June 30.

1. Prepare the journal entry to establish the petty cash fund.

2. Prepare the journal entry to replenish the fund to $800.00.

3. Prepare the journal entry to increase the fund to $1,000.00.

Answer 1

Req a.
Journal entry in the books of Marin Airline
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Petty cash account			800
	Cash account				800
	(for establishing the fund)
b.	Misc expenses			728.40
	Cash account	(800-71.60)		728.40
	(for replinishment of funds)
c.	Petty cash account			200
	Cash account				200
	(for increasing the fund value)
Req b.
Journal entry in the books of Martinez supply
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Insurance expense (3192/24)		133
	Prepaid insurance				133
b.	Supplies expense			340
	Supplies	(630-290)			340
	(for supplies consumed for the year)
c.	Interest expenses (22,560*5%*1/12)	94
	Interest payable				94
	(for interest accrued for the month)
d.	Depreciation expense		220
	Accumulated dep -Vehicle (2640/12)		220
	(for depreciation charged for the month)
e.	Unearned rent			350
	Rental revenue (1550-1200)			350
	(for revenue earned and recognized)