A city starts a solid waste landfill that it expects to fill to capacity gradually over a 38-year period. At the end of the first year, it is 14 percent filled. At the end of the second year, it is 31 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.

Problem 17-9 (LO 17-3)

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?

Multiple Choice

• $310,000.

• $170,000.

• $320,000.

• $0.