Question

A city starts a solid waste landfill during 2020. When the landfill was opened the city estimated that it would fill to capacity within 6 years and that the cost to cover the facility would be $1.8 million which will not be paid until the facility is closed. At the end of 2020, the facility was 15% full, and at the end of 2021 the facility was 35% full. If the landfill is judged to be a governmental fund, what liability is reported on the fund financial statements at the end of 2021

Answer 1

$630,000

Step-by-step explanation:

facility cost = $1.8 million = $1,800,000

The liability reported will depend on the percentage of full facility in the respective years

2020 = 15%

2021 = 35%

The liability reported on the financial statement of 2021 can be calculated as follow

Liability value 2021 = Facility cost x Percentage of the facility

Liability value 2021 = $1,800,000 x 35%

Liability value 2021 = $630,000

Hence $630,000 will be reported as a liability in respect of the facility in the financial statement of 2021.