[shawnl112]

Polk County’s solid waste landfill operation is accounted for in a governmental fund. Polk used available cash to purchased equipment that is included in the estimated current cost of closure and post-closure care of this operation. How would this purchase affect the asset amount in Polk’s governmental capital assets and the liability amount in Polk’s government-wide financial statements?

Asset amount Liability amount
A. No effect No effect
B. Increase No effect
C. No effect Decrease
D. Increase Decrease

What are the journal entries for this example?

[Frances]

I don’t know what the journal entries are, but the idea is that a liability is recorded for the cost of closing the landfill. Any assets that are purchased in connection with closing the landfill aren’t capitalized as assets. They are reductions of the liability.

[Author]

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