The Following Related Entries Were Recorded in Sequence in the General

question 67

Multiple Choice

The following related entries were recorded in sequence in the general fund of a municipality:

The sequence of entries indicates that

• A) Encumbrances were anticipated but later failed to materialize and were reversed. A liability of $12,350 was incurred.
• B) An adverse event was foreseen and a reserve of $12,000 was created; later the reserve was cancelled and a liability for the item was acknowledged.
• C) An order was placed for goods or services estimated to cost $12,000; the actual cost was $12,350 for which a liability was acknowledged upon receipt.
• D) The first entry was erroneous and was reversed; a liability of $12,350 was acknowledged.

---

Definitions:

FICA Tax

A U.S. federal tax that funds Social Security and Medicare, deducted from employees' paychecks and matched by employers.

Federal Income Tax

The tax levied by the IRS on the annual earnings of individuals, corporations, trusts, and other legal entities.

Form 941

A tax form filed by employers in the United States to report withholding taxes, Social Security, and Medicare taxes.

Social Security

A government program that provides financial assistance to people with an inadequate or no income.