Answer:
JOURNAL ENTRY
Dr. Encumbrance....$50,000
Cr. Fund Balance...............$50,000
Being issuance of Purchase order for school supplies
Explanation:
On August 10, 2018, Harmon School District issued a purchase order for school supplies in the amount of $50,000.
On August 20, the school supplies arrived, together with an invoice for $52,000.
The invoice was approved for payment because the purchase order allowed for price increases up to 5 percent.
The invoice was paid on August 30.
1. Prepare the entries necessary to record the encumbrance,
JOURNAL ENTRY
Dr. Encumbrance....$50,000
Cr. Fund Balance...............$50,000
Being issuance of Purchase order for school supplies
2. Approval for payment of the invoice,
JOURNAL ENTRY
Dr. Reserve for Encumbrance....$2,000
Cr. Fund Balance...............$2,000
Being approval for additional amount on goods received on order for school supplies
3. and payment of the invoice.
JOURNAL ENTRY
Dr. Fund Balance ...$52,000
Cr. Encumbrance.........................$50,000
Cr. Reserve For Encumbrance...$2,000
Being payment for goods received on issued purchase order and additional appropriation for excess amount.
