AC7&8 – Intermediate Accounting

Activity 2A – Cash and cash Equivalents

Panda Company established a petty cash fund to help ensure internal control over its small
expenditures. The following are the transactions affecting the petty cash fund for the month of May
2019:

1. On May 2, the company established a petty cash fund in the amount of P8,000.
2. The following were paid by the petty cash custodian from May 2 through May 20.
Freight on merchandise purchases P2,500
Freight on merchandise sold 3,000
Supplies purchased 800
OIUs from employees 1,200
3. On May 18, the employees paid their IOUs as indicated above (the advances were granted on
May 10; the proceeds from such collection were returned to the petty cash fund).
4. On May 20, the fund was replenished.
5. Payments from petty cash fund from May 20 through May 31 are as follows:
Freight on merchandise purchases P1,200
Transportation of messenger 150
Medicines for employees 320
IOUs from employees 500
6. A count of the fund on May 31 revealed bills and coins in the petty cash fund to P5,700.

The company’s reporting period ends May 31.

Required:
Prepare journal entries for the above transactions including any adjustment on May 31, 2019.
Source: Intermediate Accounting Part 1 – Robles and Empleo
Activity 2B – Cash and cash Equivalents
A count of petty cash fund in the morning of January 5, 2020 revealed the following:

Bills and coins P4,560

Petty cash vouchers
dated December 2019 3,140
dated January 2020 1,130
IOUs (without supporting vouchers)
dated December 2019 1,800
dated January 2020 1,000
Unsigned payroll envelope 2,000
(the envelope has been opened,
there is no money inside)
The imprest balance of the petty cash fund is P10,000.
Required:
(a) Determine the amount of petty cash fund that will be included in the cash balance at December
31, 2019.
(b) Determine the amount of cash shortage or overage.
(c) Prepare the necessary adjusting entry to bring the petty cash fund to its correct amount at
December 31, 2019.
Source: Intermediate Accounting Part 1 – Robles and Empleo