Which of the following statements is true regarding estimated closure costs for municipal solid waste landfills,assuming that it is operating as an enterprise fund?

Question

Quizplus · Accepted Answer

When an enterprise fund estimates closure costs for a municipal solid waste landfill, it is required to use the units-of-production method to determine the amount of expense and liability that should be recognized in each period. This method is based on a calculation of the amount of waste received by the landfill during the period in relation to the total estimated waste capacity of the landfill. Therefore, only a portion of the estimated closure costs can be recognized as expense and liability in a given period. Option A is incorrect because it implies that the total estimated closure costs can be expensed fully at the time of the estimate, which is not correct since it violates the matching principle of accounting. Option C is incorrect because modified accrual accounting principles do not apply to enterprise funds, which follow full accrual accounting principles. Option D is incorrect because option B is true.

Which of the Following Statements Is True Regarding Estimated Closure