On April 2, Granger Sales decides to establish a $360 petty cash fund to relieve the burden on Accounting. Required: (a) Journalize the establishment of the fund\.\* (b) On April 10, the petty cash fund has receipts for mail and postage of $34, contributions and donations of $19, meals and entertainment of $112, and $191 in the ending cash balance. Journalize the replenishment of the fund\.\* (c) On April 11, Granger Sales decides to increase petty cash to $470. Journalize this event\.\* *Refer to the Chart of Accounts for exact wording of account titles.

The Journal entries are as follows:

(a) On April 2,

Petty cash A/c Dr. $360

      To cash                    $360

(To record the petty cash fund)

(b) On April 10,

Mail & Postage A/c Dr. $34

Contributions and Donations A/c Dr. $19

Meals & entertainment A/c Dr. $112

Cash Short and Over A/c Dr. $4

           To cash($360 - $191)                        $169

(To record the replenishment of the fund)

(c) On April 11,

Petty Cash A/c ($470 - $360) Dr. $110

      To cash A/c                                     $110

(To record the increase in petty cash fund)

D) M1 falls by $1,000, and M2 is unchanged.

Explanation:

since checking account comes under M1, a transfer would result in fail, Therefore, a transfer would result in a change in M1 but shows no effect on M2