A city has a solid waste landfill that was filled 12 percent in Year 1 and 26 percent in Year 2. During those periods, the government expected that total closure costs would be $2 million. As a result, it paid $50,000 to an environmental company on July 1 of each of these two years. Such payments will continue for several years to come. Indicate whether each of the following independent statements is true or false and briefly explain each answer. The city has a December 31 year-end.
a. The government-wide financial statements will show a $230,000 expense in Year 2 but only if reported in an enterprise fund.
b. The fund financial statements will show a $50,000 liability in Year 2 if this landfill is reported in the General Fund.
c. The fund financial statements will show a $50,000 liability at the end of Year 2 if this landfill is reported in an enterprise fund.
d. If this landfill is reported in an enterprise fund, the government-wide financial statements and the fund financial statements will basically have the same reporting.
e. The government-wide financial statements will show a $420,000 liability at the end of Year 2.
f. Over the landfill’s entire life, the amount of expense recognized in the government-wide financial statements will be the same as the amount of expenditures recognized in the fund financial statements. Assume the landfill is reported in the General Fund.
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