Question

On January 1, 2017, the City of Hastings created a solid waste landfill that it expects to reach capacity gradually over the next 20 years. If the landfill were to be closed at the current time, closure costs would be approximately $1.84 million plus an additional $740,000 for postclosure work. Of these totals, the city must pay $59,500 on December 31 of each year for preliminary closure work. At the end of 2017, the landfill reached 2 percent of capacity. At the end of 2018, the landfill reached 16 percent of capacity. Also at the end of 2018, a reassessment is made; total closure costs are determined to be $2.04 million rather than $1.84 million. Assuming that the landfill is viewed as an enterprise fund, what journal entries are made in 2017 and 2018 on the government-wide financial statements? Assuming that the landfill is reported within the general fund, what journal entries are made in 2017 and 2018 on the government-wide financial statements? Assuming that the landfill is viewed as an enterprise fund, what journal entries are made in 2017 and 2018 on fund financial statements? Assuming that the landfill is reported within the general fund, what journal entries are made in 2017 and 2018 on fund financial statements?

Answer 1

SOLUTION:
a)	Assuming that the landfill is viewed as an enterprise fund, what journal entries are made in 2017 and 2018 on the government-wide financial statements?
Answera):		Date	General Journal	Debit	Credit
		12/31/2017	(Ist year total costs)
			Expense - Landfill Closure	1,02,400
			Landfill closure liability		1,02,400
			(To record Ist year total costs)
			Landfill closure liability	62,000
			Cash		62,000
		12/31/2018	(IInd year total costs)
			Expense - Landfill Closure	2,28,800
			Landfill closure liability		2,28,800
			(To record IInd year total costs)
			Landfill closure liability	62,000
			Cash		62,000
b)	Assuming that the landfill is reported within the general fund, what journal entries are made in 2017 and 2018 on the government-wide financial statements?
Answer b):
		Date	General Journal	Debit	Credit
		12/31/2017	(Ist year total costs)
			Expense - Landfill Closure	1,02,400
			Landfill closure liability		1,02,400
			(To record Ist year total costs)
			Landfill closure liability	62000
			Cash		62000
		12/31/2018	(IInd year total costs)
			Expense - Landfill Closure	2,28,800
			Landfill closure liability		2,28,800
			(To record IInd year total costs)
			Landfill closure liability	62000
			Cash		62000
c)	Assuming that the landfill is viewed as an enterprise fund, what journal entries are made in 2017 and 2018 on fund financial statements?
AnswerC):
		Date	General Journal	Debit	Credit
		12/31/2017	(Ist year total costs)
			Expense - Landfill Closure	1,02,400
			Landfill closure liability		1,02,400
			(To record Ist year total costs)
			Landfill closure liability	62000
			Cash		62000
		12/31/2018	(IInd year total costs)
			Expense - Landfill Closure	2,28,800
			Landfill closure liability		2,28,800
			(To record IInd year total costs)
			Landfill closure liability	62000
			Cash		62000
d)	Assuming that the landfill is reported within the general fund, what journal entries are made in 2017 and 2018 on fund financial statements?
Answer d):
		Date	General Journal	Debit	Credit
		12/31/2017	To record Ist year annual payments
			Expenditures - Landfill Closure	62000
			Cash		62000
		12/31/2018	To record IInd year annual payments
			Expenditures - Landfill Closure	62000
			Cash		62000
	Explanations:
	a)	Government-wide financial statements
		Accounted for as an enterprise fund (within the business-type activities)
	12/31/2017	Expense - Landfill Closure	4% of cost of the landfill 2017 plus additional costs after post closure
		=	4%* (1.78+0.78) millions
		=	1,02,400
	12/31/2018	Expense - Landfill Closure	12% of cost of the landfill 2018 + additional costs after post closure - 2017 expense cost
		=	(12%*(1.98+0.78))-0.1024 millions
		=	2,28,800
	d)	Since there is no other annual cost related to the work except for $62000 each year, we show these as expenditures on accounting records