Question

Use the following fact pattern to answer questions 13 through 19:

Danville, KY, population 16,735, adopted its general fund budget on July 1 for $2,657,000 for fiscal year 2021. Danville issued purchase orders totaling $11,050 on August 14. Approximately $8,860 of the goods were received on August 17 (receiving report issued), with an invoice of $8,844 received on August 18. Payment for this order was made on August 31. The remaining goods were received on September 4 with an invoice for $2,188 received on September 5.

13. Which of the following would be the third in the order of the flow of goods?

A. Appropriations.

B. Expenditures.

C. Encumbrances.

D. Payment.

14. What is the entry that would be recorded when the purchase order was issued?

A. Debit Estimated Revenues, $3,220,000.

B. Credit Encumbrances Outstanding—2021, $8,860.

C. Debit Encumbrances—2021, $11,050.

D. Credit Voucher Payable, $11,050.

15. After the purchase order is issued, what is the amount of available appropriations in the general fund?

A. $2,645,950.

B. $2,657,000.

C. $2,648,156.

D. $2,645,966.

16. The first receipt of goods on August 17 would require a:

A. Debit Encumbrances—2021, $8,844.

B. Debit Encumbrances Outstanding—2021, $8,860.

C. Credit Encumbrances—2021, $8,844.

D. Credit Encumbrances Outstanding—2021, $8,860.

17. The second receipt of goods on September 4 would require a: A. Debit Encumbrances—2021, $11,050.

B. Debit Encumbrances Outstanding—2021, $2,188.

C. Credit Encumbrances—2021, $2,190.

D. Credit Encumbrances Outstanding—2021, $2,190.

18. After the first and second receipts of goods and payments for those goods, what would be the amount of available appropriations in the general fund?

A. $2,645,966.

B. $2,645,968.

C. $2,648,156.

D. $2,648,638.

19. If the order was issued on August 14 for medical supplies for public health, the entry to record the receipt of the invoice on August 18 and September 5 would require the following at the governmental activities (government-wide) level (ignore amounts):

A. Debit Expenditures—2021.

B. Debit Expenses—Public Health. C. Debit Vouchers Payable.

D. Debit Expenses—General Fund.

Answer 1

Requirement 13:

The correct option is ‘B: Expenditures'

The following is the order for the flow of goods

      Approriattions −> Encumbrances −> Expenditures −> Payments

Requirement 14:

The correct option is ‘C: Debit Encumbrances—2021, $11,050'

The following journal entry is prepared when the purchase order issued

Date	Account Title and Explanation	Debit	Credit
Aug. 14	Encumbrances − 2021	$11,050
2021	Encumbrances Outstanding − 2021		$11,050
	To record purchased order issued

Requirement 15:

The correct option is ‘A: $2,645,950'

The appropriations available in general fund = $2,645,950 ($2,657,000 − $11,050)

Requirement 16:

The correct option is ‘B: Debit Encumbrances Outstanding—2021, $8,860.'

The following journal entry is prepared when goods are received for the first time

Date	Account Title and Explanation	Debit	Credit
Aug. 17	Encumbrances Outstanding − 2021	$8,860
2021	Encumbrances − 2021		$8,860
	To reverse encumbrances

Requirement 17:

The correct option is ‘C: Credit Encumbrances—2021, $2,190'

The following journal entry is prepared when goods are received

Date	Account Title and Explanation	Debit	Credit
Sept. 4	Encumbrances Outstanding − 2021	$2,190
2021	Encumbrances − 2021		$2,190
	To reverse encumbrances

Requirement 18:

The correct option is ‘B: $2,645,968'

The appropriations available in general fund = $2,645,968 ($2,657,000 − $8,844 − $2,188)

Requirement 19:

The correct option is ‘B. Debit Expenses—Public Health'

Date	Account Title and Explanation	Debit	Credit
Aug. 18	Debit Expenses—Public Health	$8,844
2021	Vouchers Payable		$8,844
	To record supplies purchased
Sept. 5	Debit Expenses—Public Health	$2,188
2021	Vouchers Payable		$2,188
	To record supplies purchased