A city that uses encumbrance accounting places a purchase order for three fire trucks at a cost of 100,000 each, specifying that two are to be delivered in March and one in August.
The vendor delivers the first two trucks, and sends an invoice for 200,000 . How should the city handle the encumbrance accounting when it prepares the 200,000 voucher to pay for the first two trucks?
a. it should make no encumbrance entry until all three trucks have been received
b. it should reduce encumbrances by 100,000
c. it should reduce encumbrances by 200,000
d. it should reduce encumbrances by 300,000
Question 2
A city sells 15 million of general obligation bonds on October 1, 2013 . The bonds mature at the rate of 1 million a year each September 30, starting September 30, 2014 . The amount due September 30, 2014 is paid.
How much should the city report as outstanding debt in the Debt Service Fund in its year-end fund level financial statements on December 31, 2014?
a. 15,000,000
b. 14,000,000
c. 13,750,000
d. 0
Correct use of a fire extinguisher
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