Question

When firms report depreciation to stockholders, they

A. always use the same depreciation method that they use for income taxes.

B. usually use the same depreciation method that they use for income taxes.

C. directly reduce the equipment account for depreciation on the equipment.

D. none of the above is correct.

When WorldCom, in error, permanently capitalized fees it paid when its customers used phone lines of another firm,

A. it overstated its net income.

B. it understated its expenses.

C. it violated the matching concept.

D all of the above are correct.

Answer 1

When firms report depreciation to stockholders they can use same method or different method as per income tax as we know that income tax usually follows depreciation only on written down value method but when firm report depreciation they can follow Written down but it is not necessary . Thus answer to first part is D None of the above is corect.

When worldcom in error permamnentlt capitalized fees it paid when its customer used phone lines of another firm it overstate its net income it also understate its expenses and volate the matching concept . Thus the answer is D all of the above are corecr

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