Reference no: EM132772329

Nakashima Gallery had the following petty cash transactions in February of the current year. Nakashima uses the perpetual system to account for merchandise inventory.

Feb 2

Wrote $400 check to establish a petty cash fund.

Feb 5

Purchased paper for the copier for $14.15 that is immediately used.

Feb 9

Paid $32.50 shipping charges (transportation in) on merchandise purchased for resale, terms FOB shipping point. These costs are added to merchandise inventory.

Feb 12

Paid $7.95 postage to deliver a contract to a client

Feb 14

Reimbursed Adina Sharon, the manager, $68 for mileage on her car.

Feb 20

Purchased office paper for $67.77 that is immediately used.

Feb 23

Paid a courier $20 to deliver merchandise sold to a customer, terms FOB destination.

Feb 25

Paid $13.10 shipping charges (transportation in) on merchandise purchased for resale, terms FOB shipping point. These cost are added to merchandise inventory.

Feb 27

Paid $54 for postage expenses

Feb 28

The fund had $120.42 remaining in the petty cashbox. Sorted the petty cash receipts by accounts affected and exchanged them for a check to reimburse the fund for expenditures.

Feb 28

The petty cash fund amount is increased by $100 to a total of $500

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

Problem 2. Prepare petty cash payment report for February with these categories: delivery expense, mileage expense, postage expense, merchandise inventory (for transportation-in), and office supplies expense.

Problem 3. Prepare the journal entries for part 2 to both (a) reimburse and (b) increase the fund amount.