The following environmental cost reports for 2005, 2006, and 2007 are for the Communications Products Division of Kartel, a telecommunications company. In 2005, Kartel committed itself to a continuous environmental improvement program, which was implemented throughout the company.

At the beginning of 2007, Kartel began a new program of recycling nonhazardous scrap. The effort produced recycling income totaling \($25,000\). The marketing vice president and the environmental manager estimated that sales revenue had increased by \($200,000\) per year since 2005 because of an improved public image relative to environmental performance. The company’s finance department also estimated that Kartel saved \($80,000\) in 2007 because of reduced finance and insurance costs, all attributable to improved environmental performance. All reductions in environmental costs from 2005 to 2007 are attributable to improvement efforts. Furthermore, any reductions represent ongoing savings.

Required:
1. Prepare an environmental financial statement for 2007 (for the Products Division).
In the cost section, classify environmental costs by category (prevention, detection, etc.).
2. Evaluate the changes in environmental performance.

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Environmental Activity 2005 2006 2007 Disposing hazardous waste $200,000 $150,000 $ 50,000 Measuring contaminant releases 10,000 100,000 70,000 Releasing air contaminants 500,000 400,000 250,000 Producing scrap (nonhazardous) 175,000 150,000 125,000 Operating pollution equipment 260,000 200,000 130,000 Designing processes and products 50,000 300,000 100,000 Using energy 180,000 162,000 144,000 Training employees (environmental) 10,000 20,000 40,000 Remediation (cleanup) 400,000 300,000 190,000 Inspecting processes 0 100,000 80,000