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Petty cash fund with a shortage - Gannon Company

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Gannon Company establishes a $400 petty cash fund on September 9. On September 30, the fund shows $166 in cash along with receipts for the following expenditures: transportation-in, $32; postage expenses, $113; and miscellaneous expenses, $87. The petty cashier could not account for a $2 shortage in the fund. Gannon uses the perpetual system in accounting for merchandise inventory. Prepare (1) the September 9 entry to establish the fund and (2) the September 30 entry to both reimburse the fund and reduce it to $300.

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Solution Summary

The solution presents the entries to record the initial petty cash fund, and the subseqent reimbursement of the fund. The solution explains how to calculate and report the shortage.