Jonni Jones is reviewing the cash accounting for London, Inc., a local hair salon. Jones review will focus on the petty cash account and the bank reconciliation for the month ended September 30, 2014. She has collected the following information from Londons bookkeeper for this task.

Petty Cash

1. The petty cash fund was established on September 2, 2014, in the amount of $300.

2. Expenditures from the fund by the custodian as of September 30 , 2014, were evidenced by approved receipts for the following.

Postage expense $61.50

Mailing labels and other supplies 31.00

I.O.U. from employees 25.00

Shipping charges 79.36

Newspaper advertising 38.00

Miscellaneous expense 12.80

On September 30, 2014, the petty cash fund was replenished and increased to $400; currency and coin in the fund at that time totaled $52.34.

Bank Reconciliation

Deposits in transit are determined to be $1,560, and checks outstanding at September 30 total $1,800. Cash on hand (besides petty cash) at September 30, 2014, is $425.

Instructions

Prepare all journal entries necessary to reflect the transactions above.

a) Prepare the journal entries to record the transactions related to the petty cash fund for September.

b) Prepare a bank reconciliation dated September 30, 2014, proceeding to a correct cash balance, and prepare the journal entries necessary to make the books correct and complete.

c) What amount of cash should be reported in the September 30, 2014, balance sheet?

ALPHA STATE BANK BANK STATEMENT Disbursements ReceiptsBalance $12,637 Balance, September 1, 2014 Deposits Note payment direct from customer (interest of $45) Checks cleared during May Bank service charges Balance, September 30, 2014 $35,000 1,585 $36,900 20 12,302