The following related entries were recorded in sequence in the general fund of a municipality: The sequence of entries indicates that:
A)an adverse event was foreseen and a reserve of $15,000 was created; later the reserve was cancelled and a liability for the item was acknowledged.
B)an order was placed for goods or services estimated to cost $15,000; the actual cost was $15,350 for which a liability was acknowledged upon receipt.
C)encumbrances were anticipated but later failed to materialize and were reversed.A liability of $15,350 was incurred.
D)the first entry was erroneous and was reversed; a liability of $15,350 was acknowledged.

Question

The following related entries were recorded in sequence in the general fund of a municipality:  The sequence of entries indicates that:
A)an adverse event was foreseen and a reserve of $15,000 was created; later the reserve was cancelled and a liability for the item was acknowledged. 
B)an order was placed for goods or services estimated to cost $15,000; the actual cost was $15,350 for which a liability was acknowledged upon receipt. 
C)encumbrances were anticipated but later failed to materialize and were reversed.A liability of $15,350 was incurred. 
D)the first entry was erroneous and was reversed; a liability of $15,350 was acknowledged.

Quizplus · Accepted Answer

The entry indicates that an order was placed for goods or services estimated to cost $15,000 but the actual cost was $15,350, for which a liability was acknowledged upon receipt. The initial estimate of the cost was incorrect and the actual cost was higher, leading to an increase in the liability.

The Following Related Entries Were Recorded in Sequence in the General