Baby Photography completed the following petty cash transactions during July 2020:

Required

1. Prepare a general journal entry to record establishing the petty cash fund.

2. Prepare a summary of petty cash payments similar to Exhibit 7.2 that has these categories: delivery expense, auto expense, postage expense, merchandise inventory, and office supplies.

3. Prepare the general journal entry to record the reimbursement and the decrease of the fund. Analysis Component: You supervise Bob Stuart, the petty cashier, and while reviewing the accounts you notice that the Cash Over/Short Expense account has a balance of $300 for the seven months ended July 31, 2020. Given the size of the petty cash account, does this balance appear to be unusual? Explain and identify any concerns that you might have.

Transcribed Image Text:

Prepared a $500 cheque, cashed it, and turned the proceeds and the petty cash box over to Bob Stuart, the petty cashier. July 6 Paid $46 COD charges on merchandise purchased for resale. Baby Photography uses the perpetual inventory method to account for merchandise inventory. Paid $26 delivery charges on merchandise sold to a customer. 11 12 Purchased file folders, $76 18 Purchased paper for printer, $27. Paid $31 COD charges on merchandise purchased for resale. 27 Purchased stamps, $60 28 Reimbursed Collin Dodge $134 for business car expenses. 30 Bob Stuart sorted the petty cash receipts by accounts affected and exchanged them for a cheque to reimburse 31 the fund for expenditures. However, there was $88 in cash in the fund. was decreased to $400. In addition, the size of the petty cash fund