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 Write a $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

1. Debit Petty cash for $400; and Credit Cash for $400.

2. Total petty cash payment = $270.57

3(a) Cash reimbursement is $279.58; and Cash over and short is $9.01.

3(b) Debit Petty cash for $100; and Credit Cash for $100.

Step-by-step explanation:

Note: This question is not complete. The full complete question is therefore provided before answering the question. See the attached pdf file for the full question.

The explanations to the answers are now given as follows:

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

Note: See the journal entry in the attached excel file

2. Prepare a petty cash payments report for February with these categories: delivery expense, mileage expense, postage expense, merchandise inventory (for transportation-in), and office supplies expense. Sort the payments into the appropriate categories and total the expenditures in each category.

Note: See the petty cash payments report in the attached excel file.

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

Note: See the journal entries (a) and (b) in the attached excel file

3(a) Reimburse Workings:

w.1: Calculation of Cash reimbursement

Cash reimbursement = Petty cash fund - Petty cash fund balance = $400 - $120.42 = $279.58

w.2: Calculation of the Cash over and short

Cash over and short = Cash reimbursement – Total expenses = $279.58 - $270.57 - $120.42 = $9.01

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