Question

on june 1, fab seed company creates a petty - cash fund with an imprest balance of $500. during june, ruth mangan, the fund custodian, signs the following petty - cash tickets: on june 30, prior to replenishment, the fund contains these tickets plus cash of $110. the accounts affected by petty - cash payments are supplies, travel expense, delivery expense, entertainment expense, and merchandise inventory.
requirement 1. explain the characteristics and the internal - control features of an imprest fund.
an imprest fund has the same balance at all times, which equals the sum of cash in the fund plus the total of the tickets that support payments from the fund. the internal - control feature of an imprest fund is that it clearly identifies the amount of money for which the fund custodian is responsible.
requirement 2. on june 30, how much cash should the petty - cash fund hold before it is replenished?
before it is replenished, the petty - cash fund should hold cash of $
requirement 3. journalize all required entries to create the fund and replenish it. include explanations. (record debits first, then credits. select the explanation on the last line of the journal entry table.)
begin by journalizing the creation of the fund.
date accounts and explanation debit credit
june 1

Explanation:

Step1: Identify the imprest balance

The imprest balance of the petty - cash fund is $500.

Step2: Determine the cash remaining

On June 30, the fund contains cash of $110.

Step3: Calculate the amount to replenish

The amount to replenish is the difference between the imprest balance and the cash remaining. So, $500−$110 = $390.

Step4: Journalize the creation of the fund

On June 1, to create the petty - cash fund:
Debit Petty Cash $500
Credit Cash $500

Establishing the petty - cash fund.

Step5: Journalize the replenishment of the fund

Debit Supplies $40
Debit Travel Expense (Cab fare) $25
Debit Delivery Expense $20
Debit Entertainment Expense (Business dinner) $95
Debit Merchandise Inventory $140
Credit Cash $390

Replenishing the petty - cash fund and recording expenses and inventory.

Answer:

Requirement 1: An imprest fund has a fixed balance at all times, which equals the sum of cash in the fund plus the total of the tickets that support payments from the fund. The internal control feature is that it clearly identifies the amount of money for which the fund custodian is responsible.
Requirement 2: $390
Requirement 3:

Date	Accounts and Explanation	Debit	Credit
	Cash		$500
	(Establishing the petty - cash fund)
June 30	Supplies	$40
	Travel Expense	$25
	Delivery Expense	$20
	Entertainment Expense	$95
	Merchandise Inventory	$140
	Cash		$390
	(Replenishing the petty - cash fund and recording expenses and inventory)