A partial income statement for WorldCom for year ended December 31, 2001. WorldCom, Inc. Partial Income Statement For year ended December 31, 2001 Income before income taxes, as reported $ 2,393,000,000 Add: depreciation for year (from part f) $83,306,818 Deduct: Improperly capitalized line costs (3,055,000,000) Income (loss) before taxes, restated $ (578,693,182) Income tax benefit 202,542,614 Add: minority interests 35,000,000 Net income (loss), restated $ (341,150,568) This loss of $341,150,568 is a large material difference in net income. The income reported is almost $2,000,000,000 more than the loss actually incurred by WorldCom. A difference this large is clearly important for shareholders, as they are under the impression that WorldCom was profitable during the year 2001. 81. Our company (A) is going to buy another company (B). We want to value the shares of : WorldCom, Inc. - Capitalized Costs and Earnings Quality 31 a. i. An asset is generally defined as a probable future benefit owned or controlled by a company. An expense is defined as an outflow or the using up of an asset, or the incurrence of a liability, that is central to the company's operations. ii. When costs are central to the company's operations, they should typically be expensed and listed on the income statement. Costs such as these do not meet the criteria for capitalization as they cannot be considered assets because they do not have the required probable future benefit. 32 e. The costs in the following journal entry appear in the assets section of the balance sheet. On the statement of cash flows, these costs would appear in the investing section, depending on the method and timing of payment. PP&E 3,055,000,000 Line costs expense 3,055,000,000 f. First quarter depreciation: ($771/22 years)*(4/4) = $35,045,455 million Second quarter depreciation: ($610/22 years)*(3/4) = $20,795,455 million Third quarter depreciation: ($743/22 years)*(2/4) = $16,886,364 million Fourth quarter depreciation: ($931/22 years)*(1/4) = $10,579,544 million Total depreciation for 2001: $83,306,818 g. When costs have potential future benefit, they should be capitalized as assets. b. Capitalized costs are considered assets on the balance sheet, so the total assets are increased, depending the method of payment. Over time, these costs are depreciated, which is expensed and listed on the balance sheet. Also, as the costs are depreciated, the total assets on the balance sheet are decreased with every period in which depreciation is recorded. c. Line costs for WorldCom are, for example, charges paid to local telephone networks. For year ended December 31, 2001, line costs were reported as $14,739,000,000. Line costs expense 14,739,000,000 Cash, etc. 14,739,000,000 d. WorldCom improperly capitalized costs related to central operations. These types of costs would include things like, as mentioned above, charges paid to local telephone networks as well as other operating costs. : WorldCom, Inc. - Capitalized Costs and Earnings Quality 31 a. i. An asset is generally defined as a probable future benefit owned or controlled by a company. An expense is defined as an outflow or the using up of an asset, or the incurrence of a liability, that is central to the company's operations. ii. When costs are central to the company's operations, they should typically be expensed and listed on the income statement. When costs have potential future benefit, they should be capitalized as assets. b. Capitalized costs are considered assets on the balance sheet, so the total assets are increased, depending the method of payment. Over time, these costs are depreciated, which is expensed and listed on the balance sheet. Also, as the costs are depreciated, the total assets on the balance sheet are decreased with every period in which depreciation is recorded. c. Line costs for WorldCom are, for example, charges paid to local telephone networks. For year ended December 31, 2001, line costs were reported as $14,739,000,000. Line costs expense 14,739,000,000 Cash, etc. 14,739,000,000 d. WorldCom improperly capitalized costs related to central operations. These types of costs would include things like, as mentioned above, charges paid to local telephone networks as well as other operating costs.

B and, therefore, we will use three alternatives of the structure Debt/Shareholders'

Equity so as to obtain the WACC: 1) present structure of A; 2) present structure of B,

and 3) structure used by A to finance the acquisition of B's shares. We will value the

company B by applying these three alter Question 5

What is the safe dosage/length of treatment for the drug dexmethasone

so that its destructive effects are avoided?

Question 6

1. Please explain 'odds ratio' and 'risk ratio'.

2. What is meant by saying that diabetics have a 3.3 risk ratio of

developing dementia?

Question 7

I'm a medical student from the Faculty of Medicine, Peradeniya, Sri

Lanka. I have a question about the management of aspirin poisoning. Is it

reasonable to carry out a postalkaline diuresis in these patients? 177

Drug therapy and poisoning 16

16 Drug therapy and poisoning

178

Question 8

What is meant by intermediate syndrome in organophosphorus

poisoning?

Question 9

What are the pulmonary manifestations of Pink's disease and how

common are they relative to the usual cerebral, skin and renal

effects?

Question 10

Is it necessary to administer antivenom to a person bitten by a snake

6 hours previously, presenting only with local leg swelling over the bitten

site and so far no other systemic feature of poisoning?

Question 11

What is the ideal management for scorpion bite?

Question 12

In acute anaphylaxis, you recommend IM adrenaline (epinephrine).

Surely in such an acute situation intravenous adrenaline would

be better?

Question 13

Why should patients avoid grapefruit juice if they are taking

terfenadine?

Question 14

Many older drug therapies, e.g. penicillin in streptococcal sore throat,

have never been submitted to rigorous trials such as a randomized

controlled trial (RCT). Do you think they should be?

Question 15

Please explain why some drugs are teratogenic in the first trimester and

some in the second?

Question 16

What is the difference between compliance and concordance?

Question 17

The rates of paracetamol (acetaminophen) self-poisoning have decreased

in the UK. Why is this?