A city opens a solid waste landfill that it expects to fill to capacity gradually over a 39-year period. At the end of the first year, it is 4 percent filled. At the end of the second year, it is 11 percent filled. Currently, the cost of closure and post closure is estimated at $1 million. None of this amount will be paid until the landfill has reached 90 percent of its capacity.

1) Which of the following is true for the Year 2 government-wide financial statements?

A) Expense will be $60,000 and liability will be $120,000.

B) Both expense and liability will be zero.

C) Both expense and liability will be $70,000.

D) Expense will be $70,000 and liability will be $110,000.

2) If this landfill is judged to be a proprietary fund, what liability will the city report at the end of the second year on its fund financial statements?

A) $110,000

B) 70,000

C) 0