Landfill costs must be reported as expenses during the periods of use—but only in enterprise funds.

In 2014 a city opens a municipal landfill, which it will account for in an enterprise fund. It estimates capacity to be 6 million cubic feet and usable life to be 20 years. To close the landfill, the municipality expects to incur labor, material, and equipment costs of $3 million. Thereafter, it expects to incur an additional $7 million of costs to monitor and maintain the site.

1. In 2014 the city uses 300,000 cubic feet of the landfill. Prepare the journal entry to record the expense for closure and post closure costs.

2. In 2015 it again uses 300,000 cubic feet of the landfill. It revises its estimate of available volume to 5.8 million cubic feet and of closure and post closure costs to $10.2 million. Prepare the journal entry to record the expense for closure and post closure costs.

3. In 2033, the final year of operation, it uses 350,000 cubic feet of the landfill. The actual capacity has proven to be only 5 million cubic feet, and closing costs are now estimated to be $15 million. Through the year 2032, the municipality had used 4,650,000 cubic feet and had recorded $14.2 million in closure and post closure costs. In 2033 it actually incurs $5 million in closure costs, the entire amount of which is paid in cash.

a. Prepare the journal entry to record the expense for estimated closure and post closure costs.

b. Prepare the journal entry to record the actual closure costs paid.

4. Suppose, instead, that the landfill is accounted for in the government’s general fund. Indicate how the entries differ from those in the enterprise fund.