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Aetivity 3: Discussion ln "Anatomy of a Fraud" for the discussion of expenditures incurred duri long-lived asset (Reading 9.1, page 427 in the print book), the authors of the textbook wrote about WorldCom's treating $7 billion of rental fees paid by WorldCom to other phone companies to use the other companies' phone lines as "capital expenditures" even though these fees should be treated as "revenue expenditures." The authors state that: "capitalization delayed expense recognition to future periods and thus boosted current-period profits." (Note: Boosted is "overstated" and "profit" is net income.) Objectives This activity aligns with the following Course Learning Objective and Chapter Learning Objective course learning objective #7: Illustrate how to record and report long-lived assets and identify related potentil unethical accounting practices. Chapter learning objective #2: Explain the accounting for plant asset expenditures Chapter learning objective #3: Explain the concept of depreciation and demonstrate how to apply the straight-line method Time: The time estimated to complete this activity is 30 minutes Instructions: Assume that WorldCom paid $7,000 million rental fees to other phone companies in cash at the beginning of Year 1. Instead of correctly debiting the 'Rent Expense" account (i.e. as a revenue expenditure), WorldCom debited $7,000 million to the "Equipment" account (i.e. as a capital expenditure). And, assume that WorldCom depreciated its long-lived assets such as equipment using the straight-line method over 10 years without salvage value. Use numbers in millions (i.e. dont write, e.g. $7,000,000,000 with nine zeros) to: Frnlain hom would rerording the $7,000 million to the Equipment account "delay expense

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