BAF140Assignment 9Solutions

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Exercise 7-7 (20 minutes) a. 2023 Jan. 1 Petty Cash ..................................................................... 200.00 Cash ....................................................................... 200.00 To establish the fund. b. Cameron Co. Petty Cash Payments Report January 1 - 8, 2023: Receipts: Postage expense ....................................................... $ 51.60 Merchandise inventory .............................................. 35.00 Store supplies expense ............................................. 41.55 Jim Cameron, Withdrawals ........................................ 25.00 Total receipts ................................................................................................... $153.15 Fund total .......................................................................... $200.00 Less: Cash remaining ...................................................... 46.85 Equals: Cash required to replenish petty cash ................. 153.15 Cash over/(short) .............................................................. $ -0- Jan. 8 Postage Expense ........................................................... 51.60 Merchandise Inventory ................................................... 35.00 Store Supplies Expense* ............................................... 41.55 Jim Cameron, Withdrawals ............................................ 25.00 Cash ....................................................................... 153.15 To reimburse the fund. Analysis Component If the January 8 entry to reimburse the fund was not recorded, profit would be overstated. * Either Store Supplies Expense (an expense) or Store Supplies (an asset) could be debited. However, if supplies are being purchased through Petty Cash it is likely that they are for immediate use which justifies using an expense account over an asset.
Exercise 7-12 (30 minutes) Jan. 15 Cash .............................................................................. 42,000 Sales ...................................................................... 42,000 To record sale of merchandise to cash customers. 15 Cost of Goods Sold ........................................................ 28,500 Merchandise Inventory ........................................... 28,500 To record cost of sales. 17 Accounts Receivable ..................................................... 15,800 Sales ...................................................................... 15,800 To record sale of merchandise on terms 2/10, n/30. 17 Cost of Goods Sold ........................................................ 10,500 Merchandise Inventory ........................................... 10,500 To record cost of sales. 20 Cash .............................................................................. 290,080 Credit Card Expense ...................................................... 5,920 Sales ...................................................................... 296,000 To record sale of merchandise less credit card expense; 296,000 x 2% = 5,920. 20 Cost of Goods Sold ........................................................ 198,000 Merchandise Inventory ........................................... 198,000 To record cost of sales. 25 Cash .............................................................................. 71,640 Debit Card Expense ....................................................... 360 Sales ...................................................................... 72,000 To record sale of merchandise less debit card expense; 0.5% x 72,000 = 360. 25 Cost of Goods Sold ........................................................ 48,200 Merchandise Inventory ........................................... 48,200 To record cost of sales.
Exercise 7-12 (concluded) Analysis component Although the possibility of theft is higher, cash sales would be preferable from the seller's perspective, however, often it is not convenient for customers. The inconvenience of cash might prevent customers from making purchases if that was the only means of payment accepted by Tundra Co.. Credit sales allow customers to purchase on impulse. However, two disadvantages: receipt of cash by Tundra Co. is delayed and credit sales require administrative time to monitor the timely collection from credit customers. Debit cards have the advantage of allowing customers to make impulse purchases but only if the cash balance is available in their bank account. Debit cards are also comparable to cash (no subsequent collection required) but the bank does charge a fee for this service although it is normally significantly less than the fee charged by banks for credit card transactions. Bank credit cards have the advantages of cash being collected by Tundra Co. immediately (positive effect on cash flow) and customers are limited only to their credit card limit (not their bank account balance); customers are buying on credit but the risk of collection is transferred to the credit card company. The disadvantage of credit cards is the fee charged by the administering bank. Tundra Co. will likely accept all forms of payment to enhance sales and in so doing recognize the costs and risks of each. Exercise 7-13 (20 minutes) Bank Balance Book Balance Shown or Not Shown on Add or Subtract Add or Subtract Adjust Reconciliation 1. NSF check shown on bank statement but not yet recorded by company. — Subtract Cr. Shown 2. Interest earned on the account. — Add Dr. Shown 3. Deposit made on September 5 and processed by bank on September 6. — — — Not Shown 4. Check written by another depositor but charged against this company's account. Add — — Shown
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