The combined governmental fund balance sheet of the town of Paris is presented below.
Per schedules included in the notes to the financial statements, the town had $1450 of capital assets (net of
accumulated depreciation) and $1314 in long-term liabilities associated with the capital assets.
1. Recast the balance sheets in the form of a single consolidated, full accrual balance sheet.
2. Put yourself in the place of an analyst. The town mayor presents you with the consolidated balance sheet. He asserts that the town's financial position is excellent, as measured by the exceedingly healthy fund balance. Based on your having seen the combined balance sheet that shows the individual fund types, why might you be skeptical of his claim?
3. Comment on why a consolidated balance sheet is no substitute for a combined balance sheet that reports on major funds.
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This solution involves recasting balance sheets. Governmental fund balance sheets are determined.