The Parks Corporation, a U

Multiple Choice

The Parks Corporation, a U.S. business, is a direct competitor of the Rhine Company, a German firm. The two firms not only compete for customers, but also for investment capital. In 2013, each company spent about $35,000 U.S. dollars or the equivalent on research and development. U.S. GAAP requires the entire amount to be expensed, while Germany requires its businesses to record R&D expenditures as an asset and then to 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) Parks will have higher total assets than Rhine in 2013.
B) Rhine will have a lower net income for 2013.
C) Parks will have a higher debt-to-assets ratio than Rhine in 2013.
D) This difference in accounting principles does not affect the total amount of assets reported by the two companies.