Youve just been hired as an accountant at Murdstone, Inc., a retailer of supplies for arts and crafts. Since the previous accountant left his position suddenly, the controller of Murdstone, Inc. has asked for your assistance in filling in some missing data for the companys January accounting records. Youll also be responsible for training the companys new accounting intern.

CHART OF ACCOUNTS

Murdstone, Inc.

General Ledger

	ASSETS
110	Cash
111	Petty Cash
112	Accounts Receivable
115	Inventory
116	Store Supplies
117	Office Supplies
118	Prepaid Insurance
120	Land
123	Store Equipment
124	Accumulated Depreciation-Store Equipment
125	Office Equipment
126	Accumulated Depreciation-Office Equipment
131	Notes Receivable

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Interest Payable
215	Notes Payable

	EQUITY
310	Common Stock
311	Retained Earnings
312	Dividends
313	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Goods Sold
516	Cash Short and Over
520	Salaries Expense
521	Advertising Expense
522	Depreciation Expense-Store Equipment
523	Delivery Expense
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Insurance Expense
534	Office Supplies Expense
535	Bank Service Charge
536	Repairs Expense
537	Selling Expenses
538	Store Supplies Expense
539	Miscellaneous Administrative Expense
710	Interest Expense

The controller has completed the T accounts for the Cash and Sales accounts as of January 30, but needs to attend an important conference in another city. She has requested that you prepare the T account for the Cash Short and Over account as of January 30 also. You are told that the balance of the account is zero as of the beginning of January, and that all the companys sales are in cash. To simplify, this problem assumes that a company has only one bank account, which is identified in the Ledger as Cash.

Review the following T accounts, and then scroll down to complete the Cash Short and Over T account and answer the associated question that follows it.

Cash
Balance 1/1	5,500	1/2 Establish Petty Cash	500
1/5	2,800
1/12	6,230
1/23	3,270
1/30	4,450
Balance	21,750

Sales
		Balance 1/1	0
		1/5	2,805
		1/12	6,205
		1/23	3,300
		1/30	4,390
		Balance	16,700

Review the preceding T accounts, and then complete the Cash Short and Over T account and associated question that follows it.

Cash Short and Over
Balance 1/1	0
		Balance

What will happen to the ending balance in the Cash Short and Over account at the end of the accounting period?

The discrepancy must be reported to the Securities and Exchange Commission.

It will be a miscellaneous expense on the income statement.

The discrepancy must be reported on the company website.

It will be added to the Other Income section of the income statement.

Murdstone, Inc. issued a check on January 2 to establish a petty cash fund of $500. On January 31, the amount of cash in the petty cash fund is $442. The company would like to issue a check to replenish the fund, based on the following summary of petty cash receipts:

Account	Amount on Receipt
Office Supplies	$28.00
Miscellaneous Administrative Expense	$23.00

The companys policy is to record any missing funds in the Cash Short and Over account.

The new intern has prepared a proposed journal entry to record the replenishing of the petty cash fund:

PAGE 17

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1	Jan. 31	Petty Cash		51.00
2		Cash			51.00

Prepare for your discussion with the intern by journalizing the correct entry for the replenishment of the petty cash fund. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 17

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4

The companys accounting intern has prepared the end-of-January bank reconciliation from the bank statement, and is worried because the Adjusted Balance amounts do not agree. After reviewing the bank reconciliation, scroll down for the next steps in helping the intern.

Murdstone, Inc.

Bank Reconciliation

January 31, 20Y7

1	Cash balance according to bank statement		$23,557.98
2	Adjustments:
3	Deposit in transit on January 31	$12,125.25
4	Outstanding Check No. 124	(62.00)
5	Outstanding Check No. 125	(86.00)
6	Outstanding Check No. 129	(1,250.00)
7	Total adjustments		10,727.25
8	Adjusted balance		$34,285.23
9
10	Cash balance according to Murdstone, Inc.		$51,567.88
11	Adjustments:
12	Note and interest collected by bank	$15,250.75
13	Check returned because of insufficient funds	(23,475.40)
14	Bank service charge	(400.00)
15	Error in recording Check No. 123	(9,000.00)
16	Total adjustments		(17,624.65)
17	Adjusted balance		$33,943.23

You assist the intern to check source documents, and find that most of the dollar amounts are correct; however, two dollar amounts are incorrect. After reviewing the following table, scroll down for the next steps in helping the intern.

Item	Correct in Interns Reconciliation?	If No, Corrected Amount
Cash balance according to bank statement	Yes
Deposit in transit on January 31	Yes
Outstanding Check No. 124	Yes
Outstanding Check No. 125	No	$68.00
Outstanding Check No. 129	Yes
Cash balance according to Murdstone, Inc.	Yes
Check returned because of insufficient funds	Yes
Note and interest collected by bank	Yes
Bank service charge	No	$40.00
Murdstone error in recording Check No. 123 as $12,435.00 rather than the correct amount of $21,435.00	Yes

After asking the intern to search for other errors by comparing her reconciliation to prior bank reconciliations prepared by the former accountant, you work together to compute the corrected Adjusted Balance. Enter your answer with two decimal places.

Corrected Adjusted Balance amount: