When Spruce City Receives Goods at a Cost of $9,700

Multiple Choice

When Spruce City receives goods at a cost of $9,700 that were encumbered in the prior year for $10,000, which of the following entries are required (assume that encumbrances lapse at year end) ?

A) Debit Expenditures $9,700; credit Accounts payable $9,700; no entry for Encumbrances.
B) Debit Expenditures $9,700 and Reserve for encumbrances $10,000; credit Accounts payable $9,700 and Encumbrances $10,000.
C) Debit Expenditures $10,000 and Reserve for encumbrances $10,000; credit Accounts payable $10,000 and Encumbrances $10,000.
D) Debit Reserve for encumbrances $10,000; credit Encumbrances $10,000; no entry for Expenditures.