FULL QUESTION: A city starts a solid waste landfill during 2017. When the landfill was opened the city estimated that it would fill to capacity within 5 years and that the cost to cover the facility would be $1.5 million which will not be paid until the facility is closed. At the end of 2017, the facility was 20% full, and at the end of 2018 the facility was 45% full.
On government-wide financial statements, what is the appropriate amounts to present in the financial statements for 2018?
Answer:
At the end of 2017, the facility was 20% full, that means 20% of $1,500,000 is gone as an expense. Therefore,
$1,500,000 × 20% = $300,000 Expense for 2017
At the end of 2018, the facility was 45% full, that means 45% of $1,500,000 is gone as an expense. Therefore,
$1,500,000 × 45% = $675,000
Liability at Year End of 2018
$675,000 liability at Year-End of 2018 - $300,000 Liability at Year-End 2017 = $375,000 Expense for 2018.
Expense will be $375,000 and liability will be $675,000.