Problem 8–7A Suppose that, on June 1, Devine Design creates a petty cash fund with an imprest balance of $400. During June, Lucie Ducharme, the fund custodian, signs the following petty cash tickets:

Ticket No. Item Amount 101 Office supplies $ 26.64 102 Cab fare for executive 60.00 103 Delivery of package across town 29.33 104 Dinner money for sales manager entertaining a customer 133.33 105 Office supplies 127.20 On June 30, prior to replenishment, the fund contains these tickets plus $34.39. The accounts affected by petty cash payments are Office Supplies Expense, Travel Expense, Delivery Expense, and Entertainment Expense.

Required 1. Explain the characteristics and internal control features of an imprest fund.

2. On June 30, how much cash should the petty cash fund hold before it is replenished?

3. Make general journal entries to

(a) create the fund and

(b) replenish it. Include explanations.

4. Make the July 1 entry to increase the fund balance to $500. Include an explanation, and briefly describe what the custodian does in this case.