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Chapter 7: 15BE (page 364)

Finman Company designated Jill Holland as petty cash custodian and established a petty cash fund of \(200. The fund is reimbursed when the cash in the fund is at \)15, which it is. Petty cash receipts indicate funds were disbursed for office supplies \(94 and miscellaneous expense \)87. Prepare journal entries for the establishment of the fund and the reimbursement.

Short Answer

Expert verified

Cash short and over equals$4.

Step by step solution

01

Definition of Cash Short and Over

Cash short and over reflects the difference between the cash balance reported in the financial statement and the cash balance reported under audit.

02

Journal Entries

Date

Accounts and Explanation

Debit $

Credit $

1

Petty Cash

$200

Cash

$200

2

Office Supplies

$94

Miscellaneous expenses

$87

Chas short and over

$4

Cash$200-$15

$185

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Most popular questions from this chapter

Wilton, Inc. had net sales in 2017 of \(1,400,000. At December 31, 2017, before adjusting entries, the balances in selected accounts were Accounts Receivable \)250,000 debit, and Allowance for Doubtful Accounts $2,400 credit. If Wilton estimates that 8% of its receivables will prove to be uncollectible, prepare the December 31, 2017, journal entry to record bad debt expense.

Indicate how the percentage-of-receivables method, based on an aging schedule, accomplishes the objectives of the allowance method of accounting for bad debts. What other methods, besides an aging analysis, can be used for estimating uncollectible accounts?

What is the theoretical justification of the allowance method as contrasted with the direct write-off method of accounting for bad debts?

Francis Equipment Co. closes its books regularly on December 31, but at the end of 2017 it held its cash book open so that a more favorable balance sheet could be prepared for credit purposes. Cash receipts and disbursements for the first 10 days of January were recorded as December transactions. The information is given below.

1. January cash receipts recorded in the December cash book totaled \(45,640, of which \)28,000 represents cash sales, and \(17,640 represents collections on account for which cash discounts of \)360 were given.

2. January cash disbursements recorded in the December check register liquidated accounts payable of \(22,450 on which discounts of \)250 were taken.

3. The ledger has not been closed for 2017.

4. The amount shown as inventory was determined by physical count on December 31, 2017.

The company uses the periodic method of inventory.

Instructions

(a) Prepare any entries you consider necessary to correct Francis’s accounts at December 31.

(b) To what extent was Francis Equipment Co. able to show a more favorable balance sheet at December 31 by holding its cash book open? (Compute working capital and the current ratio.) Assume that the balance sheet that was prepared by the company showed the following amounts:

Debit

Credit

Cash

\(39,000

Accounts receivables

42,000

Inventory

67,00

Accounts payable

\)45,000

Other Current liabilities

14,200

(Expected Cash Flows) On January 1, 2017, Botosan Company issued a \(1,200,000, 5-year, zero-interest bearing note to National Organization Bank. The note was issued to yield 8% annual interest. Unfortunately, during 2018 Botosan fell into financial trouble due to increased competition. After reviewing all available evidence on December 31, 2018, National Organization Bank decided that the loan was impaired. Botosan will probably pay back only \)800,000 of the principal at maturity.

Instructions

(a) Prepare journal entries for both Botosan Company and National Organization Bank to record the issuance of the note on January 1, 2017. (Round to the nearest $10.)

(b) Assuming that both Botosan Company and National Organization Bank use the effective-interest method to amortize the discount, prepare the amortization schedule for the note.

(c) Under what circumstances can National Organization Bank consider Botosan’s note to be impaired?

(d) Compute the loss National Organization Bank will suffer from Botosan’s financial distress on December 31, 2018. What journal entries should be made to record this loss?
See all solutions

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