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Suppose that on September 1, Lavene Motors opens a new showroomin Napanee, Ontario, and creates a petty cash fund with an imprestbalance of $500. During, September, Lisa Manfield, the fundcustodian, signs the petty cash tickets shown below.

TicketNo. Item Amount

1 Courier for packagereceived $49.67

2 Refreshments for showroomopening $101.00

3 Computerdisks $88.07

4 Officesupplies $7.50

5 Dinner money for sales managerentertainment $87.50

On September 30, prior to replenishment, the fund contains thesetickets plus $161.34. The accounts affected by petty cash paymentsare Office Supplies Expenses, Entertainment expenses, and DeliveryExpenses.

1. Explain the characteristics and the internal control features of animprest fund.

2. On September 30, how much cash should this petty cash fund holdbefore it is replenished?

3. Make the general journal entries to (A) create the fund and (B)replenish it. Include explanation.

4. Due to the risk of robbery, make the entry on October 1 to decreasethe fund balance to $400. Include explanation.

Req.1


Req. 2

Req. 3. (a) (creation ofthe petty cash fund)

General Journal

DATE

ACCOUNT TITLES AND EXPLANATIONS

POST. REF.

DEBIT

CREDIT

Ù­

Ù­

Ù­

Ù­ (b) (replenishment of the petty cash fund)

General Journal

DATE

ACCOUNT TITLES AND EXPLANATIONS

POST. REF.

DEBIT

CREDIT

(continued)P8-8B

Req. 4 (decreasing the amount of the petty cashfund)

General Journal

DATE

ACCOUNT TITLES AND EXPLANATIONS

POST. REF.

DEBIT

CREDIT

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Beverley Smith
Beverley SmithLv2
28 Sep 2019

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