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Financial Accounting and Accounting Decision Questions
Need help with my accounting question – I’m studying for my class.
Read the following excerpt from a complaint filed by the Securities and Exchange Commission against WorldCom (posted online at http://www.sec.gov/litigation/complaints/comp17829.htm (Links to an external site.)).
WorldCom officers and employees fraudulently made and caused the making of false and fictitious entries in WorldCom’s general ledger which effectively “transferred” a significant portion of its line cost expenses to a variety of capital asset accounts, thereby effectively recharacterizing, without any supporting documentation, and in a manner inconsistent with GAAP, the operating expenses it had incurred for access to third party networks as “assets.” |
Post your answers to the following questions as a response to this post. Please give this some thought! I look forward to hearing your ideas and opinions on this case!
When a company incurs a cost, its accountants have to decide whether to record the cost as an asset or expense. When costs are recorded as an asset, they are said to be capitalized. This builds on ideas first presented in Chapter 2, where you learned that it was appropriate to record costs as assets, provided that they possess certain characteristics. What are those characteristics?
Some authors claim that even with clear rules like those referenced in question 1 above, accounting still allows managers to use “tricks” like capitalizing expenses. What do you suppose is meant by the expression “capitalizing expenses”?
Suppose that, in the current year, a company inappropriately records a cost as an asset when it should be recorded as an expense. What is the effect of this accounting decision on the current year’s net income? What is the effect of this accounting decision on the following year’s net income?
Do you think it is always easy and straightforward to determine whether costs should be capitalized or expensed? Do you think it is always easy and straightforward to determine whether a manager is acting ethically or unethically? Give examples to illustrate your views.
Financial Accounting and Accounting Decision Questions
RUBRIC |
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Excellent Quality 95-100%
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Introduction
45-41 points The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned. |
Literature Support 91-84 points The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned. |
Methodology 58-53 points Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met. |
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Average Score 50-85% |
40-38 points More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided. |
83-76 points Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration. |
52-49 points Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met. |
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Poor Quality 0-45% |
37-1 points The background and/or significance are missing. No search history information is provided. |
75-1 points Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration. |
48-1 points There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met |
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Financial Accounting and Accounting Decision Questions |
Financial Accounting and Accounting Decision Questions