A City Had Placed a Purchase Order for $25,000 for Street

Multiple Choice

A city had placed a purchase order for $25,000 for street maintenance supplies; the order allowed for price increases up to 5 percent of the order. The vendor shipped the supplies and billed the city for a total of $26,000. The city inspected the shipment and approved the invoice for $26,000. What budgetary journal entry should the city make when the supplies are received?

A) Debit Budgetary fund balance reserved for encumbrances and credit Encumbrances for $25,000.
B) Debit Budgetary fund balance reserved for encumbrances for $26,000 and credit Encumbrances for $26,000.
C) Debit Budgetary fund balance reserved for encumbrances for $26,000, credit Encumbrances for $25,000, and credit Budgetary fund balance for $1,000.
D) Debit Budgetary fund balance reserved for encumbrances for $25,000, debit Expenditures for $1,000, and credit Encumbrances for $26,000