$1)8\mathrm{.}1.$ Capitalizing versus Expensing Decision.

When a firm incurs costs on an item to be used in operations, management must decide whether to treat the cost as an asset or an expense. Assume that a company used cash to acquire machinery expected to contribute to the generation of revenues over a three$-$year period and the company erroneously expensed the cost to acquire the machine.

Ignoring tax effects, describe the effects on ROA of the error over the three$-$year period.

Explain how the error would affect the statement of cash flows.