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Much has been written about the accounting fraud and subsequent bankruptcy of WorldCom. The Baltimore Sun reported that the "fraud was brazen (and) easy to spot. . . . The scheme was not complicated: the company's financial officers recorded routine maintenance expenses totaling $3.9 billion as capital expenditures, which can be written off over decades rather than booked as immediate expenses."

REQUIRED:

a. Explain how capitalizing an item, instead of expensing it, affects the financial statements.

b. Which principle of accounting is being violated? Are other principles involved? Discuss.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92221039

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