Chapter 2: Accounting and Reporting Principles 2-11. ACCT 260

2-11. Accounting and Reporting Principles. (LO2-3) The financial statements ofthe Town of Fordville consist of a statement of cash receipts and a statement ofcash disbursements prepared by the town treasurer for each of its three funds:the General Fund, the Road Tax Fund (special revenue fund), and the SewerFund (enterprise fund). As required by state law, the town submits its financialstatements to the Office of the State Auditor; however, due to its small size, itsfinancial 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 CPAlicense, to supervise all accounting and financial reporting operations. Havingworked 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 ofgovernmental accounting, she is confident that her foundation in business andnot-for-profit accounting will enable her to handle the job.

Using her experience with not-for-profit organizations, for the year endedDecember 31, 2020, Ms. Ramirez prepared the following unaudited financialstatements for the Town of Fordville. Assuming the city wants to prepare financial statements in accordance with GASB standards, study the financialstatements and answer the questions that follow.

Required

a. What basis of accounting does it appear Ms. Ramirez has used? Explainhow you arrived at your answer.

b. Given what you know about the town's activities, what financial statementswould the town be required to prepare using GASB standards?

c. 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 section of the text and Illustrations A2-1 and A2-2, explain what modifications would be needed tomake the two financial statements conform to the format of the financialstatements you have identified.2-12. Evaluation of a City's Basic Financial.

Reck, Jacqueline. Accounting for Governmental & Nonprofit Entities (p. 60). McGraw-Hill Higher Education. Kindle Edition.