Multiple Choice
Pierce Corporation,a U.S.business,is a direct competitor of Zeiss Company,a German firm.The two firms not only compete for customers,but also for investment capital.In Year 1,each company spent about $35,000 U.S.dollars or the equivalent on research and development.U.S.GAAP requires the entire amount to be expensed,while Germany requires its businesses to record R&D expenditures as an asset and then to expense it over its useful life.Assuming the treatment of R&D is the only difference between the two firms,which of the following is correct?
A) Pierce will have higher total assets than Zeiss in Year 1.
B) Pierce will have a higher debt-to-assets ratio than Zeiss in Year 1.
C) Zeiss will have a lower net income for Year 1.
D) This difference in accounting principles does not affect the total amount of assets reported by the two companies.
Correct Answer:
Verified
Correct Answer:
Verified
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