For more than 100 years, the financial statements of the Town of Fordville have consisted 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).
Cases 2-11. 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 Investments 7.468 Due from other governments 28.766 Land, buildings and equipment (net of accumulated depreciation of $132.640) 287.580 Total assets $344.109 Liabilities and Net Assets Accounts payable $ 3,892 Due to other governments 11.943 Total liabilities 15.835 Net assetswithout donor restrictions 299,893 Net assetswith donor restrictions 28.381 Total net assets 328.274 Total liabilities and net assets $344.109 $ 121,290 3,580 6,859 239 TOWN OF FORDVILLE Statement of Activities Year Ended December 31, 2020 (unaudited) Revenues Property taxes Charges for services Sewer fees Investment income Total revenues Expenses Government services Sewer services Miscellaneous Total expenses Increase in net assets Net assets, January 1, 2020 Net assets, December 31, 2020 131.968 115.958 7,227 8.462 131.647 321 327.953 $ 328.274 Required a. What basis of accounting does it appear Ms. Ramirez has used? Explain how you arrived at your answer. b. Given what you know about the town's activities, what financial statements would the town be required to prepare using GASB standards? Cases 2-11. 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 Investments 7.468 Due from other governments 28.766 Land, buildings and equipment (net of accumulated depreciation of $132.640) 287.580 Total assets $344.109 Liabilities and Net Assets Accounts payable $ 3,892 Due to other governments 11.943 Total liabilities 15.835 Net assetswithout donor restrictions 299,893 Net assetswith donor restrictions 28.381 Total net assets 328.274 Total liabilities and net assets $344.109 $ 121,290 3,580 6,859 239 TOWN OF FORDVILLE Statement of Activities Year Ended December 31, 2020 (unaudited) Revenues Property taxes Charges for services Sewer fees Investment income Total revenues Expenses Government services Sewer services Miscellaneous Total expenses Increase in net assets Net assets, January 1, 2020 Net assets, December 31, 2020 131.968 115.958 7,227 8.462 131.647 321 327.953 $ 328.274 Required a. What basis of accounting does it appear Ms. Ramirez has used? Explain how you arrived at your answer. b. Given what you know about the town's activities, what financial statements would the town be required to prepare using GASB standards
