(Learning Objective 1: Capitalizing versus expensing; measuring the effect of an error) Agence France Press (AFP) is a major French telecommunication conglomerate. Assume that early in year 1, AFP purchased equipment at a cost of 6 million euros (E6 million). Management expects the equipment to remain in service 4 years and estimated residual value to be negligible. AFP uses the straight line depreciation method. Through an accounting error, AFP expensed the entire cost of the equipment at the time of purchase. Because AFP is operated as a partnership, it pays no income tax.
Required
Prepare a schedule to show the overstatement or understatement in the following items at the end of each year over the 4 year life of the equipment:
1.Total current assets 2. Equipment, net 3. Net income