Marcella Ltd. (ML) is a Northern Ontario based manufacturer of building materials. In the fourth quarter of 20X1, ML’s board of directors agreed with senior management that the company needed to restructure its operations so as to be more competitive, as competition from abroad was intensifying. Therefore, the board reviewed and accepted management’s recommendations for the following series of actions:

a. Production of insulation products will cease. Instead, a western company will be contracted to supply insulation products that will be sold under ML’s label. ML’s insulation production equipment will be sold, assuming a buyer can be found; if no buyer can be found, the facilities will be scrapped. The current carrying value of the facilities is $1,800,000. ML’s production manager estimates that the equipment could be sold for about $750,000, provided that ML paid the dismantling (estimated at $50,000) and shipping costs (which would depend on the location of the buyer).

b. The 12 employees currently involved exclusively in insulation production will be given eight weeks’ severance pay. The average wage is $950 per week. Six other employees only partly involved in the insulation division will be assigned to other duties within the organization.

c. The production processes in the adhesives division will be modernized and streamlined. Computer controlled mixing will be introduced for more consistent product quality. The upgrade has been priced at $2,200,000. Employee retraining will be required, which will cost an additional $180,000. The old equipment will be dismantled and the salvage sent for recycling.

By the end of 20X1, the employees of the insulation division had been notified of the outsourcing of insulation products and the planned shutdown of production. Management set 20 April 20X2 as the changeover to outsourcing. Of course, the restructuring plan had become public knowledge by that time, a development that was causing some agitation in the provincial government. By 20X1 year end, ML had entered into a contract for supplying the new computerized equipment for adhesives mixing; the value of the contract was $1,250,000 and ML had paid a 10% advance to the supplier. Other equipment (estimated to cost $620,000) had not yet been ordered, although a nonbinding memorandum of agreement had been
reached with a supplier.

Required:
Assume that ML is a public company. How would the events described above be reported in its financial statements at the end of 20X1? Be specific.