Consolidated balances are not substitutes for individual fund balance sheets.

The combined governmental funds balance sheet of the town of Paris is presented on the facing page. Per schedules included in the notes to the financial statements, the town had $1,450 of capital assets (net of accumulated depreciation) and $1,315 in long-term liabilities associated with the capital assets.

1. Recast the balance sheets in the form of a single consolidated, full accrual balance sheet.

2. Put yourself in the place of an analyst. The town mayor presents you with the consolidated balance sheet. He asserts that the town€™s financial position is excellent, as measured by the exceedingly €˜€˜healthy€™€™ fund balance. Based on the combined balance sheet that shows the individual fund types, why might you be skeptical of his claim?

3. Comment on why a consolidated balance sheet is no substitute for a combined balance sheet that reports upon major funds.

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Town of Paris Combined Balance Sheet Special Capital Debt Permanent General Revenue Projects Service (Endowment) Lin Fund in Fund uin Totals Assets Cash Investments Due from other funds Total assets 38 105 S 20 60 120 $200 35 480 46 S561 $340 136 10 960 443 1,741 205 $2,389 $143 $515 $970 Liabilities and fund balances Accounts payable Due to other funds Fund balances Total liabilities and 205 2,176 $2,389 205 (70) $143 $200 $200 S561 S561 $515 $515 $970 $970 fund balances