I need help with question 3 please !

I need help with question 3 please !

Organized in 1983, WorldCom Inc. provides a broad range of communications services to both U.S. and non-U.S. based businesses and consumers. The company's strategy is to provide service through their own facilities throughout the world instead of being restricted to a particular geographic location. The company's core business is communications services, which include voice, data, Internet and international services. During the second quarter of 2002, WorldCom announced that costs totaling $3.9 billion had been improperly capitalized in five preceding quarters which overstated pretax earnings by the same amount. Subsequently, the magnitude of the fraudulent accounting entries has increased and World Com filed for Chapter 11 bankruptcy protection. (Source: Company 2001 Form 10-K) Refer to the 2001 financial statements and notes for WorldCom, Inc. and to the Wall Street Journal article dated June 27, 2002. FASB Statement of Concepts No. 6 (a replacement for SCON No. 3), Elements of Financial Statements, describes the building blocks with which financial statements are constructed. 1) Explain, in your own words, how SCON 6 defines "asset" and "expense." 2) In general, when should costs be expensed and when should they be capitalized as assets? 2. Refer to WorldCom's statement of operations. What did the company report as line costs for the year ended December 31, 2001? Prepare the journal entry to record these transactions for the year. Explain in your own words, what these "line costs" are. 3. Refer to the Wall Street Journal article. Describe the types of costs that were improperly capitalized at WorldCom. Do these costs meet your definition of assets in part 1 above? 4. Prepare a single journal entry to record the improperly capitalized line costs of $3.055 billion for the year. Where did these costs appear on the balance sheet? In a sworn statement to the Securities and Exchange Commission, World Com revealed details of the improperly capitalized amounts (in millions) in 2001: $771 in the first quarter, $610 in the second quarter, $743 in the third quarter, and $931 in the fourth quarter. Assume that World Com planned to depreciate these capitalized costs over the midpoint of the range for transmission equipment as disclosed in note 1. Further assume that depreciation begins in the quarter that assets are acquired (or costs capitalized). Calculate the related depreciation expense for 2001. Prepare the journal entry to record this depreciation. 6. Use your answers to parts 4 and 5 above, to determine what WorldCom's net income would have been in 2001 had line-costs not been improperly capitalized. Use 35% as an approximation of WorldCom's 2001 marginal income tax rate, in your calculations. State any other assumptions you make