David Soul, a not-for-profit organization that provides healthcare to the elderly, has the following activity in the purchases account:
• The budgeted purchases for the year, as approved by the board of directors, are $260,000.
• The purchasing manager has committed to buy $30,000 of materials in the month of January and has issued purchase orders for that amount. During the month of January, $20,000 of the materials has been received and the organization has paid $15,000 of the invoiced amounts.
• The purchase manager has committed to an additional $30,000 of materials in February. Of this $30,000, $28,000 has been received and $20,000 has been paid out. In addition, the balance of the materials on the $30,000 purchase order from January has been received and an additional $10,000 has been paid on that amount.
Required
-Using encumbrance accounting, provide the journal entries that David Soul would make in January and February.
-Indicate the balance that would appear on the David Soul Statement of Operations for purchases for the two months.