Albany Co.,which uses a perpetual inventory system,has a $400 petty cash fund.At the end of the first month,the accumulated receipts represent $60 for delivery expenses,$140 for incoming freight charges,$90 for entertainment expense,and $20 for miscellaneous expenses.The fund has a balance of $105.The journal entry to record the reimbursement of the account is:
A)Debit Petty Cash,$295; Credit Cash,$295.
B)Debit Merchandise Inventory,$200; Debit Entertainment Expense,$90; Debit Miscellaneous Expenses,$20; Credit Cash,$295; Credit Cash Over and Short,$15.
C)Debit Merchandise Inventory,$140; Debit Delivery Expense,$60; Debit Entertainment Expense,$90; Debit Miscellaneous Expenses,$20; Credit Cash,$295; Credit Cash Over and Short,$15.
D)Debit Merchandise Inventory,$140; Debit Delivery Expense,$60; Debit Entertainment Expense,$90; Debit Miscellaneous Expenses,$20; Credit Cash,$310.
E)Debit Delivery Expense,$200; Debit Entertainment Expense,$90; Debit Miscellaneous Expenses,$20; Credit Cash,$295; Credit Cash Over and Short,$15.

Question

Quizplus · Accepted Answer

According to the information given, the accumulated receipts represent $60 for delivery expenses, $140 for incoming freight charges, $90 for entertainment expense, and $20 for miscellaneous expenses. Therefore, these expenses need to be recorded by debiting the respective expense accounts. The total of these expenses is $310, which is the amount that needs to be reimbursed. Since the petty cash fund had a balance of $105, it should be debited for $295 to bring it back to its original amount. The reimbursement amount of $310 should be credited to Cash. The difference between the total expenses and the amount reimbursed ($310 - $295 = $15) is recorded in the Cash Over and Short account, which should also be credited. Therefore, the journal entry would be:
Debit Delivery Expense - $60
Debit Merchandise Inventory - $140
Debit Entertainment Expense - $90
Debit Miscellaneous Expenses - $20
Debit Petty Cash - $295
Credit Cash - $310
Credit Cash Over and Short - $15

Albany Co,Which Uses a Perpetual Inventory System,has a $400 Petty Cash