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Note: This Is a Kaplan CPA Review Question

Question 76

Multiple Choice

Note: This is a Kaplan CPA Review Question
The following related entries were recorded in sequence in the general fund of a municipality: Note: This is a Kaplan CPA Review Question The following related entries were recorded in sequence in the general fund of a municipality:   The sequence of entries indicates that A)  Encumbrances were anticipated but later failed to materialize and were reversed. A liability of $12,350 was incurred. B)  An adverse event was foreseen and a reserve of $12,000 was created; later the reserve was cancelled and a liability for the item was acknowledged. C)  An order was placed for goods or services estimated to cost $12,000; the actual cost was $12,350 for which a liability was acknowledged upon receipt. D)  The first entry was erroneous and was reversed; a liability of $12,350 was acknowledged.
The sequence of entries indicates that


A) Encumbrances were anticipated but later failed to materialize and were reversed. A liability of $12,350 was incurred.
B) An adverse event was foreseen and a reserve of $12,000 was created; later the reserve was cancelled and a liability for the item was acknowledged.
C) An order was placed for goods or services estimated to cost $12,000; the actual cost was $12,350 for which a liability was acknowledged upon receipt.
D) The first entry was erroneous and was reversed; a liability of $12,350 was acknowledged.

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