Question

During the month of July, the Town of Lynton recorded the following information related to purchases:

 

	Amount of Purchase Order				Actual Cost
General government	$	559,000			$	499,000
Public safety		744,200				729,013
Public works		963,845				472,480
Culture and recreation		63,270				63,320
Total purchase orders and invoices	$	2,330,315			$	1,763,813

At the end of the month, several purchase orders remained outstanding for all functions except Culture and Recreation. Public Works in particular had a large amount of purchase orders outstanding because it had put in an order for delivery of paving materials to be delivered over the months of July and August. For all but Culture and Recreation, consider the amounts for purchase orders received the same as the actual cost of the items.  

Answer 1

a. (1) Prepare the general journal entry to record the issuance of the purchase orders:

Account Title	Debit ($)	Credit ($)
Encumbrance Outstanding	2,330,315
Encumbrance Reserve		2,330,315

a. (2) Show entries in subsidiary ledger accounts.

Encumbrances Subsidiary
Particulars	Debit ($)	Particulars	Credit ($)
		General Government	559,000
		Public Safety	744,200
		Public works	963,845
		Culture and Recreation	63,270
		Total	2,330,315

b. (1) Prepare the general journal entries to record the receipt of the goods ordered at the actual cost shown and the related payable.

Account Title	Debit ($)	Credit ($)
Encumbrance Reserve	1,763,763
Expenditures	1,763,813
Accounts Payable		1,763,813
Encumbrance Outstanding		1,763,763

b. 2) Show entries for the subsidiary ledger accounts.

Expenditure
Particulars	Debit ($)	Particulars	Credit ($)
		General Government	499,000
		Public Safety	729,013
		Public works	472,480
		Culture and Recreation	63,320
		Total	$1,763,813

Encumbrances Subsidiary
Particulars	Debit ($)	Particulars	Credit ($)
		General Government	499,000
		Public Safety	729,013
		Public works	472,480
		Culture and Recreation	63,270
		Total	$1,763,763