Carolina City places an order for a specific item of equipment and encumbers $6,000 for that item.The equipment arrives with an invoice for $5,700.Which of the following entries should the city make upon receipt of the equipment?
A)A debit to expenditures for $5,700, a debit to accounts payable for $300, and a credit to encumbrances for $6,000.
B)A debit to expenditures for $5,700, a debit to reserve for encumbrances for $6,000, a credit to accounts payable for $5,700, and a credit to encumbrances for $6,000.
C)A debit to expenditures for $5,700, a debit to reserve for encumbrances for $300, and a credit to accounts payable for $6,000.
D)A debit to expenditures for $300, a debit to reserve for encumbrances for $5,700, and a credit to encumbrances for $6,000.

Question

Quizplus · Accepted Answer

The city should record the actual expenditure of $5,700 and clear the encumbrance of $6,000 by debiting reserve for encumbrances and crediting encumbrances. The accounts payable should match the invoice amount of $5,700.

Carolina City Places an Order for a Specific Item of Equipment