This post addresses machinery installed to replace employees
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New machinery was installed to replace a number of employees, who were paid an extra month's wages and dismissed. This amount was added to the cost of the machinery. Discuss the propriety of the charge. If it was improper, describe the proper treatment.
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Solution Summary
The solution provides the correct answer for the question in the Intermediate Accounting textbook that asks, New machinery was installed to replace a number of employees, who were paid an extra month's wages and dismissed. This amount was added to the cost of the machinery. Discuss the propriety of the charge. If it was improper, describe the proper treatment.
The solution was written based on 25+ years of professional experience in the accounting and auditing industry.
Solution Preview
The proper way to handle this transaction would be the following:
The cost of installing the new machinery would be capitalized by the company. The extra month's wages that the employees were paid should not be ...
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