A county previously encumbered $15,000 for the acquisition of supplies. The supplies were received at a total cost of $14,700. To recognize this event the county should make which of the following entries?
A) Debit Reserve for encumbrances $15,000; Credit Encumbrances $15,000.
B) Debit Reserve for encumbrances $14,700; Credit Encumbrances $14,700.
C) Debit Encumbrances $15,000; Credit Reserve for encumbrances $15,000.
D) Debit Encumbrances $14,700; Credit Reserve for encumbrances $14,700.

Question

Quizplus · Accepted Answer

When the supplies are received at a cost lower than the encumbered amount, the correct entry is to reverse the original encumbrance for the full amount. This is done by debiting the Reserve for Encumbrances and crediting Encumbrances for the full encumbered amount of $15,000, not just the actual cost of $14,700.

A County Previously Encumbered $15,000 for the Acquisition of Supplies