The accountant for Ye Olde Bookstore balanced out the cash register for the day.The company began the day with $125 and ended the day with $1,150.25 in the cash drawer.That day's cash register tape shows $1,031.50 in cash sales.What is the effect on the financial statements of the entry to record the day's sales and any related overage or shortage?

Question

The accountant for Ye Olde Bookstore balanced out the cash register for the day.The company began the day with $125 and ended the day with $1,150.25 in the cash drawer.That day's cash register tape shows $1,031.50 in cash sales.What is the effect on the financial statements of the entry to record the day's sales and any related overage or shortage?
The accountant for Ye Olde Bookstore balanced out the cash register for the day.The company began the day with $125 and ended the day with $1,150.25 in the cash drawer.That day's cash register tape shows $1,031.50 in cash sales.What is the effect on the financial statements of the entry to record the day's sales and any related overage or shortage? A) Option A B) Option B C) Option C D) Option D

Quizplus · Accepted Answer

Expected change in cash = Cash sales of $1,031.50
Actual change in cash = Ending cash on hand of $1,150.25 - Beginning cash on hand of $125.00 = $1,025.25
Shortage = Expected change in cash (actual cash sales)of $1,031.50 - Actual change in cash of $1,025.25 = $6.25
When the company records the day's sales and the shortage,it will increase assets (cash)by $1,025.25 and decrease stockholders' equity (retained earnings)by the same amount.It will increase revenue by the cash sales of $1,031.50 and increases expenses by the amount of the shortage of $6.25;resulting in an increase to net income of $1,025.25.A cash inflow for operating activities of $1,025.25 will be reported on the statement of cash flows.

The Accountant for Ye Olde Bookstore Balanced Out the Cash