3 5 Recording Encumbrances. During July 2010, the first month of the 2011 fiscal year, the City of Marion issued the following purchase orders and contracts (see Problem 3 4): General government $

3–5 Recording Encumbrances. During July 2010, the first month of the 2011 fiscal

year, the City of Marion issued the following purchase orders and contracts (see

Problem 3–4):

General government $ 50,000

Public safety 200,000

Public works 75,000

Health and welfare 65,000

Miscellaneous 4,000

Total purchase orders and contracts $394,000

Required

a. Show the general journal entry to record the issuance of the purchase orders

and contracts. Show entries in subsidiary ledger accounts as well as general

ledger accounts.

b. Explain why state and local governments generally record the estimated

amounts of purchase orders and contracts in the accounts of budgeted governmental

funds, whereas business entities generally do not prepare formal

entries for purchase orders

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