Filemyr Corporation, a U

question 59

Multiple Choice

Filemyr Corporation, a U.S. business, is a direct competitor of the Hyakawa Company, a Japanese firm. The two firms not only compete for customers, but also for investment capital. In 2014, each company spent about $3,000,000 U.S. dollars or the equivalent on research and development. US GAAP requires the entire amount to be expensed, while Japan requires its businesses to capitalize R&D and expense it over its useful life. Assuming the treatment of R&D is the only difference between the two firms, which of the following is correct?

• A) Filemyr will have higher total assets than Hyakawa in 2014.
• B) Hyakawa will have a lower net income for 2014.
• C) Filemyr will have a higher debt-to-assets ratio than Hyakawa in 2014.
• D) There will be no differences between the two companies' financial statements for 2014.

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Definitions:

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