A state government begins a project to build administrative facilities, funded by a bond issue. A capital projects fund is set up to account for the construction activities, and an encumbrance is appropriately recognized in the capital projects fund for the full amount of the construction contracts, which is $10 million. At the end of the first year, only $2 million has been billed by contractors and recorded as expenditures. At the beginning of the second year, what entry is necessary in the capital projects fund to recognize the remaining encumbrances of $8 million?

Select one:

A. Dr. encumbrances, cr. fund balancecommitted

B. No entry is made.

C. Dr. expenditures, cr. encumbrances

D. Dr. encumbrances, cr. fund balancerestricted