In: Accounting
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 $1.50 million plus an additional $810,000 for postclosure work. Of these totals, the city must pay $58,000 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 12 percent of capacity. Also at the end of 2018, a reassessment is made; total closure costs are determined to be $1.70 million rather than $1.50 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
a) Assuming that the landfill is viewed as an enterprise Fund, Journal Entries for the year 2017 and 2018 on the basis of government- wide financial statements are as follows:-
Date | Particulars | Debit | Credit | |||||||||
12/31/2017 | (Ist year total costs) | |||||||||||
Expense - Landfill Closure | 46200(WN1) | |||||||||||
Landfill closure liability | 46200 | |||||||||||
(To record Ist year total costs) | ||||||||||||
Landfill closure liability | 58000 (WN3) | |||||||||||
Cash | 58000 | |||||||||||
12/31/2018 | (2nd Year Total Costs) | |||||||||||
Expense - Landfill Closure | 255000 (WN2) | |||||||||||
|
255000 | |||||||||||
|
||||||||||||
Landfill Closure Liability | 58000 (WN3) | |||||||||||
Cash | 58000 | |||||||||||
(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
Date | Particulars | Debit | Credit | |||||||||
12/31/2017 | (Ist year total costs) | |||||||||||
Expense - Landfill Closure | 46200(WN1) | |||||||||||
Landfill closure liability | 46200 | |||||||||||
(To record Ist year total costs) | ||||||||||||
Landfill closure liability | 58000 (WN3) | |||||||||||
Cash | 58000 | |||||||||||
12/31/2018 | (2nd Year Total Costs) | |||||||||||
Expense - Landfill Closure | 255000 (WN2) | |||||||||||
|
255000 | |||||||||||
|
||||||||||||
Landfill Closure Liability | 58000 (WN3) | |||||||||||
Cash | 58000 | |||||||||||
(c) Assuming that the landfill is viewed as an enterprise fund, what journal entries are made in 2017 and 2018 on fund financial statements?
Date | Particulars | Debit | Credit | |
12/31/2017 | (Ist year total costs) | |||
Expense - Landfill Closure | 46200(WN1) | |||
Landfill closure liability | 46200 | |||
(To record Ist year total costs) | ||||
Landfill closure liability | 58000 (WN3) | |||
Cash | 58000 | |||
12/31/2018 | (2nd Year Total Costs) | |||
Expense - Landfill Closure | 255000 (WN2) | |||
|
255000 | |||
|
||||
Landfill Closure Liability | 58000 (WN3) | |||
Cash | 58000 |
d) Assuming that the landfill is reported within the general fund, what journal entries are made in 2017 and 2018 on fund financial statements?
Date | Particulars | Debit ($) | Credit ($) | |
12/31/2017 | (To record 1st Year Annual Payments) | |||
Expenditures - Landfill Closure | 58000 | |||
|
58000 | |||
12/31/2018 |
|
|||
Expenditure - LandFill Closure | 58000 | |||
Cash | 58000 |
Working
Note:-
1) Expense- Landfill Closure for 31st Dec, 2017 = 2% of Cost of
Landfill in 2017 plus Additional costs after post closure)
= 2% of (1.50 + 0.81) millions
= $ 46200
2) Expense- Landfill Closure for 31st Dec, 2018 = 12% of the cost of the landfill in 2018 + Additional costs after post closure - 2017 expense costs.
= (12% of (1.70+ 0.81))- 0.0462 millions
= $ 255000
3) Since there is no other annual cost related to the work expect for $ 58000 each year, we show these as expenditures on accounting records.
4) Government - wide Financial Statements
Accounted for as an Enterprise Fund (Within the business- type activities)
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