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James Case and Erica Gallardo are considering differences between accounting income and economic income when evaluating capital projects. Case makes the following statements to Gallardo:

Statement 1:	One of the main reasons why accounting income and economic income will differ is that interest expense is subtracted when calculating accounting income, but is not considered when computing economic income.
Statement 2:	Another reason why accounting income and economic income may differ is that accounting depreciation is based on original costs while economic depreciation is based on market values.

Gallardo considers both of Case’s statements. Gallardo would find which statements CORRECT?

A. Neither are correct.
B. Both are correct.
C. Only one is correct.

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