Acorn-France is a major telecommunication conglomerate. Assume that early in year one, Acorn-France purchased equipment at a cost of 5 million euros (€5 million). Management expects the equipment to remain in service for four years and the estimated residual value to be negligible. Acorn-France uses the straight-line depreciation method. Through an accounting error, Acorn-France expensed the entire cost of the equipment at the time of purchase. Because Acorn-France is operated as a partnership, it pays no income tax?
Requirements
Prepare a schedule to show the overstatement or understatement in the following items at the end of each year over the four-year life of the equipment:
1. Total current assets
2. Equipment, net
3. Net income