2.2 A well-known accounting malpractice is to book expenses as investment. An example was WorldCom, which tried to book "line costs" (interconnection expenses with other telecommunication companies) as capital expenditures instead of Prufrock Corporation 2009 and 2010 Balance Sheets S mWons Current liabilities 84 $ 165 312 $ 231 Accounts payable Accounts receivable Notes payable 531 $ Long-tem debt Owners' cquity Common stock and paid-in surplus Retained carnings Net plant and equipment 500 550 2,041 Total lia bilities and equity Prufrock Corporation Income Statement Sales Cost of goods sold Depreciation Earnings before interest and taxes Interest paid Taxable income Taxes Net income $ 2,311 $1,344 276 691 141 550 187 363 Dividends Additions to retained earnings 121 242 If Prufrock, of the Chapter 3 spreadsheet, incurs $50 million of expenses in 2009, then how do the financial statements change? How do the Profit Margin, ROE, ROA change? (i) (ii) If Prufrock allocates this a capital expenditure, how does the balance sheet change? How do the Pofit Margin, ROE, ROA change? iii) Does the firm look better under (i) or (ii)