Answered step by step
Verified Expert Solution
Question
1 Approved Answer
In a massive fraud by Worldcom, $3.1 billion of 2001 line access charges were classified as assets when they should instead have been classified as
In a massive fraud by Worldcom, $3.1 billion of 2001 line access charges were classified as assets when they should instead have been classified as expenses. Using those fraudulent numbers, Worldcom reported net income of $1.4 billion and total assets of $103.9 billion for 2001. We define return on assets (ROA) as net income divided by total assets, converted to a percentage, e.g., net income of 20 divided by total asets of 100 is an ROA of 20%. a. Calculate Worldcom's 2001 ROA using its fraudulent, reported numbers (round to one decimal place). % b. Calculate what Worldcom would have reported for total assets if it had accounted for line access charges properly. Ignore any potential tax implications and provide your answer in billions to one decimal point, to conform with the original report. $ billions c. Calculate what Worldcom would have reported as net income if it had accounted for line access charges properly. Ignore any potential tax implications and provide your answer in billions to one decimal point, to conform with the original report. $ billions d. Calculate Worldcom's 2001 ROA as if it had accounted for the line access charges properly (ignore any potential tax implications and round to one decimal place). %
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started