Question

assume that the custodian of a $780 petty cash fund has $172.50 in coins and currency plus $580.50 in receipts at the end of the month. the entry to replenish the petty cash fund will include:

Answer 1

To replenish the petty cash fund, you credit cash and debit various expense accounts for a total of $607.50, restoring the petty cash fund to its original amount of $780.

Step-by-step explanation:

The student is dealing with a petty cash replenishment scenario in an accounting context. The custodian has $172.50 in coins and currency, and receipts worth $580.50. The total of coins, currency, and receipts should match the original petty cash fund amount, which is $780. To replenish the fund, you would debit the various expenses as per the receipts and credit cash for the total amount spent, which would bring the petty cash back to its original amount.

To calculate the replenishment amount, you subtract the cash on hand from the original fund amount:

$780 (original fund) - $172.50 (cash on hand) = $607.50 (amount to replenish)

This means the entry would include debits to the appropriate expense accounts totaling $607.50 and a credit to the cash for $607.50 to restore the fund to its set amount of $780.

Answer 2

The correct answer is C. A credit to Cash for $580.50.

A. A debit to Cash Over and Short for $2700: This is incorrect because the cash is not actually over or short. There is $172.50 in cash on hand and $580.50 in receipts, which totals $753, exceeding the original $780 fund by $27.

B. A credit to Cash Over and Short for $608: This is incorrect because the difference between the actual cash and the original fund is only $27, not $608.

Here's the breakdown of the correct entry:

Debit to Petty Cash: This is because we are replenishing the fund back to its original amount of $780.

Credit to Cash: This is because the fund is being replenished with actual cash, not with receipts. The receipts simply document the expenditures that have already been made from the fund.

Therefore, the correct journal entry is:

Debit Petty Cash $27

Credit Cash $580.50

Complete Question:

Assume that the custodian of a $780 petty cash fund has $172.50 in coins and currency plus $580.50 in receipts at the end of the month. The entry to replenish the petty cash fund will include:

Multiple Choice

a. A debit to Cash Over and Short for $27.00

b. A credit to Cash Over and Short for $608

c. A credit to Cash for $580.50