Transcontinental is a major telecommunication conglomerate. Assume that early in 2018, Transcontinental purchased equipment at a cost of 6 million euros (€6 million). Management expects the equipment to remain in service for four years and the estimated residual value to be negligible. Transcontinental uses the straight-line depreciation method. Because of an accounting error, Transcontinental expensed the entire cost of the equipment at the time of purchase. Because Transcontinental operates as a partnership, it pays no income taxes.
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
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