Question

During the current year, the Wilson County Landfill Enterprise Fund installed wells designed to assist in the ground water monitoring process after closure for their solid waste landfill. The landfill has reached 40% of its capacity and is expected to continue to accept waste until 2012. The costs of the wells were $80,000. The appropriate entry to record this event is a credit to Cash for $80,000 and an $80,000 debit to

a) Fixed assets.
b) Landfill expenses.
c) Liability for landfill costs.
d) Deferred expenses.

Answer 1

The installation of groundwater monitoring wells at a landfill Enterprise Fund is recorded as a long-term asset. The correct journal entry is a debit to Fixed assets and a credit to Cash for $80,000.

Step-by-step explanation:

The cost of the wells installed at the Wilson County Landfill Enterprise Fund designed for ground water monitoring should be recorded as an asset because it represents a long-term investment in the infrastructure of the landfill that will provide economic benefits over several years.

Therefore, the correct entry would be a credit to Cash for $80,000 and a debit to Fixed assets for the same amount. This is because the wells are part of the long-term infrastructure that extends the landfill's functionality, rather than an expense for a single year or a liability directly associated with the closure of the landfill.

Also, they are not considered a deferred expense because the benefit is ongoing as part of the landfill's operation and closure plan.