Use the same information as in problem 51 except that, by the end of Year 3, the landfill is 40 percent filled. The city now realizes that the total closure costs will be $3 million. Indicate whether each of the following independent statements is true or false and briefly explain each answer.
a. If the city had known the costs were going to be $3 million from the beginning, the reporting on the fund financial statements would have been different in the past years if the landfill had been reported in an enterprise fund.
b. If the landfill is monitored in the general fund, a liability will be reported for the governmental activities in the government-wide financial statements at the end of Year 3.
c. A $680,000 expense should be recognized in Year 3 in the government-wide financial statements.
d. Because the closure costs reflect a future flow of cash, any liability reported in the governmentwide financial statements must be reported at present value.
Data from Problem 51
A city maintains a solid waste landfill that was 12 percent filled at the end of year 1 and 26 percent filled at the end of Year 2. During those periods, the government estimated that total closure cost would be $2 million. It pays $50,000 to an environmental company on July 1 of each of these two years to begin some of the restoration process. Such payments will continue for years to come. Indicate whether each of the following independent statements is true or false and briefly explain each answer. They 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. Fund financial statements will show a $50,000 liability in Year 2 if this landfill is reported in the general fund.
c. 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 the city reports this landfill in an enterprise fund, government-wide financial statements and fund financial statements will have the same basic reporting.
e. Government-wide financial statements will show a $420,000 liability at the end of Year 2.
