Explain how would recording the $7,000 million to the Equipment account “delay expense recognition to future periods” and thus “boost net income for Year 1.

Assume that WorldCom paid $7,000 million (i.e. $7 billion or $7,000,000,000) rental fees to other phone companies in cash at the beginning of Year 1.

  • Explain how would recording the $7,000 million to the Equipment account “delay expense recognition to future periods” and thus “boost net income for Year 1.
  • Besides net income in the income statement, total assets in the balance sheet would also be wrong. Indicate how would total assets at the end of Year 1 be wrong and by how much .