Note: This Is a Kaplan CPA Review Question

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:
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.