The Town of Tonawanda Has $40,000 of Purchase Orders Outstanding

The Town of Tonawanda has $40,000 of purchase orders outstanding at the end of 2011 which will be honored.The goods and supplies were received early in January,2012.The invoice amounted to $38,750. What is the journal entry necessary to re-establish the encumbrance at the beginning of 2012?

A) Budgetary Fund Balance -- Reserve for Encumbrances 40,000
Encumbrances Control (2011) 40,000
Expenditures Control (2011) 38,750
Accounts payable 38,750
B) Encumbrances Control (2011) 40,000 Fund Balance 40,000
C) Encumbrances Control (2011) 40,000 Budgetary Fund Balance
-- Reserve for Encumbrances (2011) 40,000
D) Budgetary Fund Balance -- Reserve for Encumbrances (2011) 40,000
Fund Balance 40,000