In 2017, We-Non-Cha Woodworking Ltd. (We-Non-Cha) purchased and installed a new state of-the-art lathe line in its
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a. How should the cost of the extra work have been accounted for? Explain.
b. What would be the effect of capitalizing the cost of the extra work instead of expensing it on net income and total assets (amount and direction of the error) in 2017, 2018, and 2019? Explain your reasoning.
c. What would be the effect of capitalizing the cost of the extra work instead of expensing it on the cash flow statement in each of years 2017 through 2019?
d. Assuming the effect is material, what would be the implications of capitalizing the cost of the extra work instead of expensing it for users of the financial statements? Explain.
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