in what could become one of the largest accounting frauds in history worldcom announ 691636

In what could become one of the largest accounting frauds in history, WorldCom announced the discovery of $7 billion in expenses improperly booked as capital expenditures, a gimmick that boosted profit over a recent five quarter period. If these expenses had been recorded properly, WorldCom, one of the biggest stock market stars of the 1990s, would have reported a net loss for 2001, as well as for the first quarter of 2002. Instead, WorldCom reported a profit of $1.4 billion for 2001 and $130 million for the first quarter of 2002. As a result of these problems, WorldCom declared bankruptcy, to the dismay of its investors and creditors. What erroneous accounting entries (accounts debited and credited) were made by WorldCom? What is the correcting entry that should be recorded, and what is its effect on WorldCom’s financial statements?