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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.
Given what you know about the town’s activities, what financial statements would the town be required to prepare using GASB standards?
Whitman Company has just completed its first year of operations. The company’s absorption costing income statement for the year appears below:
The company’s selling and administrative expenses consist of $210,000 per year in fixed expenses and$2 per unit sold in variable expenses. The $16 per unit product cost given above is computed as follows:
- Redo the company’s income statement in the contribution format using variable costing.
- Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption costing income statement above.