Moss Company purchased a building costing $800,000 on January 1, 2017. Moss is depreciating the building over 80 years using the straight-line method with no salvage value. The economic life of the building is expected to be 40 years. As a result of Moss's accounting procedure, its 2017:

Question

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By depreciating the building over 80 years instead of its economic life of 40 years, Moss is reducing its annual depreciation expense, which leads to a higher net income and therefore overstated earnings per share. However, as the building is being depreciated over a longer period than its useful life, the company's assets are overstated and equity is understated, resulting in an understated debt/equity ratio. Therefore, earnings per share are overstated and debt/equity ratio is understated.

Moss Company Purchased a Building Costing $800,000 on January 1