Accounting and Reporting Principles. (LO2-30 ) The financial statements of the Town of Fordville consist of a statement of cash receipts and a statement of cash disbursements prepared by the town treasurer for each of its three funds: the General Fund, the Road Tax Fund (special revenue fund), and the Sewer Fund (enterprise fund). As required by state law, the town submits its financial statements to the Office of the State Auditor, however, due to its small size, its financial statements have never had to be audited by an independent auditor. Because of its growing population (nearing 20,000) and increasing financial complexity, the town has hired Emily Ramirez, who recently obtained her CPA license, to supervise all accounting and financial reporting operations. Having worked two years for a CPA firm in a nearby town, Ms. Ramirez gained limited experience auditing not-for-profit organizations, as well as compiling financial statements for small businesses. Although she has little knowledge of governmental accounting, she is confident that her foundation in business and not-for-profit accounting will enable her to handle the job Using her experience with not-for-profit organizations, for the year ended December 31, 2020, Ms. Ramirez Page 59 prepared the following unaudited financial statements for the Town of Fordville. Assuming the city wants to prepare financial statements in accordance with GASB standards, study the financial statements and answer the questions that follow TOWN OF FORDVILLE Balance Sheet December 31, 2020 (unaudited) Assets Cash $ 1.740 Taxes receivable 18.555 7.468 28.766 287.580 Investments Due from other governments Land, buildings, and equipment (net of accumulated depreciation of $132.640) Total assets Liabilities and Net Assets Accounts payable Due to other governments $344,109 $ 3.892 11.943 Total liabilities 15.835 299,893 Net assetswithout donor restrictions Net assetswith donor restrictions Total net assets 28.381 328.274 Total liabilities and net assets $344,109 TOWN OF FORDVILLE Statement of Activities Year Ended December 31, 2020 (unaudited) Revenues $ 121,290 3,580 Property taxes Charges for services Sewer fees Investment income Total revenues 6.859 239 131.968 115.958 7.227 8.462 Expenses Government services Sewer services Miscellaneous Total expenses Increase in net assets Net assets, January 1, 2020 Net assets, December 31, 2020 131.647 321 327,953 $ 328,274 equired What basis of accounting does it appear Ms. Ramirez has used? Explain how you arrived at your answer. - Given what you know about the town's activities, what financial statements would the town be required to prepare using GASB standards? The financial statements presented appear to be most comparable to which two financial statements prepared using GASB standards? Using the information from the Financial Reporting Model Q section of the text and Page 60 Illustrations A2-1 and A2-2 9. explain what modifications would be needed to make the two financial statements conform to the format of the financial statements you have identified