Research the appropriate gaap and create a memo to cfo

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Question

Fargo Co. has recently acquired a new stamping machine for use in its manufacturing facility. Certain components of this machine are prone to wear and must be replaced, on average, once every three years at a cost of $120,000. The CFO of the company has elected to accrue that maintenance activity in advance, debiting Maintenance Expense at a rate of $40,000 per year.

Research the appropriate GAAP and create a memo to the CFO indicating whether this treatment is appropriate and citing the Codi?cation. If it is not appropriate, illustrate the proper journal entry.

Reference no: EM132381451

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