$1)$ 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.

$2$ Testing for Goodwill Impairment.

Goodwill is an intangible asset that firms report on their balance sheets as a result of acquiring other firms. Goodwill generally has an indefinite life and should not be amortized, but it should be tested for impairment at least annually. As of the writing of this text, the goodwill impairment testing process is changing in the U$.$S$.$ Describe the old and new procedures prescribed by U$.$S$.$ GAAP to test for goodwill impairment.

$3)$ Foreign Currency as Functional Currency.

Identify the exchange rates used to translate income statement and balance sheet items when the foreign currency is defined as the functional currency. Discuss the logic for the use of the exchange rates you identified.