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

1) Encumbrances ........................12,000 DR .

Reserve for Encumbrances .........12,000 CR .

2) Reserve for Encumbrances .............12,000 DR .

Encumbrances ....................12,000CR .

3) Expenditures ..........................12,350 DR .

Vouchers Payable .................12,350 CR .

1.The sequence of entries indicates that

A. an adverse event was foreseen and a reserve of $12,000 was created; later the reserve was canceled and a liability for the item was acknowledged.

B. 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.

C. encumbrances were anticipated but later failed to materialize and were reversed; a liability of $12,350 was incurred.

D. The first entry was erroneous and was reversed; a liability of $12,350 was acknowledged.

2. Assuming appropriate governmental accounting pnnclples were followed, the entries

A. occurred in the same fiscal period.

B. did not occur in the same fiscal period.

C. could have occurred in the same fiscal period, but it is impossible to be sure of that.

D. would have reflected the equivalent of a "prior period adjustment" if the entity concerned had been operated for profit.

3. Immediately after entry 1 was recorded, the municipality had a balanced general fund budget for all transactions. Recording entries 2 and 3 would

A. not affect the current budget but would affect the budget of the following fiscal period.

B. not change the balanced condition of the budget.

C. cause the municipality to show a deficit.

D. cause the municipality to show a surplus.