A city starts 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 postclosure is estimated at $1 million. None of this amount will be paid until the landfill has reached its capacity.

If this landfill is judged to be a governmental fund, what liability will be reported at the end of the second year on fund financial statements?

a. $110,000.

b. $120,000.

c. $70,000.

d. $0.