27. ABC Manufacturing Company has a $100.00 petty cash fund. The fund has vouche

Question

27. ABC Manufacturing Company has a $100.00 petty cash fund. The fund has vouchers for entertainment $20.00 and $10.00 for advertising. What is the journal entry to create the fund on Jan 1st and replenish the fund on Jan 31st? 4 points

28. The following information was abstracted from the 2016 financial statements of Jennings Company: 16 points

    Sales                                                            $747,000 *  

    Accounts Receivable, December 31, 2016   128,000    

    Allowance for Doubtful Accounts                    1,220 (credit balance)

    Sales discounts                                               18,000 *  

    Sales returns                                                   12,400 *  

    * 30% related to credit sales and the sales discounts and sales returns relate to credit sales.

Prepare the adjusting entry for doubtful accounts expense under each of the following two assumptions:

(1) 3 percent of current accounts receivable are uncollectible.

(2) 2.5 percent of net credit sales are uncollectible.

(3) Assume John Smith has a debit balance is his account of $500. He is bankrupt and the credit manager informs you that you have to write off the account.

(4)Assume Tom Jones a previous customer with a balance of $1,000 was written off last year. He is out of bankruptcy and the credit manager informs you that he wants to reestablish his account and pay off his previous balance.

What is the journal entry to reestablish his account?

What is the journal entry for the payment of $1,050 ($50 is interest)?

(4). Assume the entry in (3) and that John Smith wants reinstate his account six months later and pays you $525.00 cash.

(5) For income taxes, Jennings Co. has to use the direct write-off method. In 2016, $10,000 of customers are bankrupt. Record the GJ entry?

(6) Will the entry in (5), increase or decrease net income?

Explanation / Answer

27. The journal entry for creating the petty cash fund is given below:

Journal entry on 31st January to replenish the fund:

Explanations:

A total disbursement of $30 was made from petty cash fund - $20 towards entertainment and $10 towards advertising. This amount will have to be replenished on 31st January to ensure that the fund is back at level of $100.

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