Question 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 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 s 1.740 18.555 7,468 28.766 S344.109 Taxes receivable Investments Due from other governments Land, buildings, and equipment (net of accumulated depreciation of S132,640) 287.580 Total assets Liabilities and Net Assets Accounts payable Due to other governments Total liabilities Net assetswithout donor restrictions Net assetswith donor restrictions $ 3.892 11.9.43 15.535 299.893 28.381 Total net assets 328.274 Total liabilities and net assets S344.109 TOWN OF FORDVILLE Statement of Activities Year Ended December 31, 2020 (unaudited) Revenues Property taxes Charges for services Sewer fees Investment income $ 121.290 3.580 6.859 239 Total revenues 131.968 115.958 7.227 Expenses Government services Sewer services Miscellaneous Total expenses Increase in net assets Net assets, January 1, 2020 Net assets, December 31, 2020 S.462 131.647 321 327.953 S 328,274 Based on above information, answer the following questions: 1. What basis of accounting does it appear Ms. Ramirez has used? Explain how you arrived at your answer. (8 marks) 2. Are above those two financial statements reveal that the statements clearly do conform to the GASB standard. Explain. (8 marks) 3. The information provided indicates that the town has three fund classifications: governmental funds (General fund and special revenue fund) and proprietary (enterprise fund). As a result the town would be required to prepare the financial statements, i.e Governmental fund financial statements, Proprietary fund financial statements, and Government-wide financial statements. You are required to list the name of statements under the above three categories (.e. Governmental fund financial statements, Proprietary fund financial statements, and Government-wide financial statements). [9 marks]
