The accounting system used by the Franklin Company requires that all entries be journalized in a general journal. To facilitate payments of small items, Franklin Company recently established a petty cash fund. The following transactions involving the petty cash fund occurred during August (the last month of the company's fiscal year).

Aug. 3 A company check for \(\$ 200\) was drawn and made payable to the petty cashier to establish the petty cash fund.

14 A company check was drawn to replenish the fund for the following expenditures made since August 1 and to increase the fund to \(\$ 300\).

a. Purchased postage stamps for \(\$ 44\).

b. Payment of \(\$ 42.30\) to Meeks Trucking for delivery of merchandise to customers.

c. Gave Beth Rogers, owner of the business, \(\$ 50\) for personal use.

d. Paid \(\$ 60.50\) to Appliance Company for repairs of office equipment.

\(e\). Discovered that only \(\$ 1.20\) remained in the petty cashbox.

31 The petty cashier noted that \(\$ 2.60\) remained in the fund. Having decided that the August 14 increase in the fund was not large enough, a company check was drawn to replenish the fund for the following expenditures made since August 14 and to increase it to \(\$ 350\).

a. Payment of \(\$ 97.25\) for office supplies to support the company's computer.

b. Payment of \(\$ 52.15\) for items classified as miscellaneous general expense.

c. Payment of \(\$ 63\) for janitorial service.

d. Payment of \(\$ 85\) to Southern Advertising Company for a space advertisement in a weekly newsletter.

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1. Prepare general journal entries to record the establishment of the fund on August 3 and its replenishments on August 14 and on August 31.

2. If Franklin Company had failed to replenish the petty cash fund on August 31, what would have been the effect on net income for the fiscal year ended August 31 and on total assets on August 31? Explain your answer. (Hint: The amount of Office Supplies to appear on a balance sheet is determined by a physical count of the supplies on hand.)