Challenge Exercise 2 Chapter 7

Expands on: E7-7

LO: 2

Kris Allen Company established a petty cash fund on May 1, cashing a check for $150. The company reimbursed the fund on June 1 and July 1 with the following results.

June 1: Cash in fund $4.75. Receipts: delivery expense $31.25; postage expense $39.00; and miscellaneous expense $62.00.

July 1: Cash in fund $3.25. Receipts: delivery expense $31.00; entertainment expense $71.00; and miscellaneous expense $44.75.

On July 10, Kris Allen increased the fund from $150 to $200.

Instructions:

(a) Prepare journal entries for Kris Allen Company for May 1, June 1, July 1, and July 10.

(b) What internal control features are present in a petty cash fund?