Chapter 12, Problem 50P

Use the same information as in problem 44 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.

1. 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 it the landfill had been reported in an enterprise fund.
2. 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.
3. c. A $680,000 expense should be recognized in Year 3 in the government-wide financial statements.
4. d. Because the closure costs reflect a future flow of cash, any liability reported in the government-wide financial statements must be reported at present value.