Cameron Co. established a $180 petty cash fund on January 1, 2020. One week later, on January 8, the fund contained $34.95 in cash and receipts for these expenditures: postage, $50.40; transportation-in, $32.40; store supplies, $39.35; and a withdrawal of $22.90 by Jim Cameron, the owner. Cameron uses the perpetual method to account for merchandise inventory. a. Prepare the journal entry to establish the fund on January 1.

b. Prepare a summary of the petty cash payments and record the entry to reimburse the fund on January 8. (Round your answers to 2 decimal places.)

Analysis Component:

If the January 8 entry to reimburse the fund were not recorded and financial statements were prepared for the month of January, would profit be over- or understated?

multiple choice

• Overstated

• Understated