Financial Statement Analysis Chp006

1. Describe the impact the three proposed accounting methods (full revenue recognition, deferral of revenue, and partial revenue recognition) would have on the company’s financial statements: 1) at the time of the sale, and 2) in future periods.

b.What are the amounts and timing of the acquisition investment’s free cash flow from 2013 through 2022?

2. What is the effect of the depreciation accounting method change on the reported income in 1984? How will this change affect profits in future years?

The cost of the 30-second commercial ($2,000,000) is capitalized (treated as an asset) until the ad airs for the first time and will be amortized over future periods. Advertising costs are expensed when the related revenue is recognized which will be the first appearance of the ad in direct-response advertising. The company 's obligation for advertising expenditures it will make subsequent to recognizing

b. Why do you think Microsoft decided to defer a portion of its revenues in fiscal 1996?

g) evidence is available from internal reporting that indicates that the economic performance of an

3. Do you expect this profit level to continue in subsequent years? Why or why not?

| (TCO A,B,C) A property's desirability, relative to competing properties, is influenced by all of the following except ______________ .

Explain the corresponding impact on total revenue for each of the three price ranges identified in part G.

f) To evaluate the material misstatement in the accounts, I think both of the consolidated income statement and the three financial statements are useful. We need to use the information properly from all the financial statements. However the consolidated income statement is the most useful one. If there is a significant change in an account balance comparing with preceding two years, the auditor will examine whether there a material misstatement exists. For instance, the bad debt expense as a percent of net sales in 2011, 2010 and 2009 are 0.56%, 0.70% and 0.69%, respectively. There should

Answer: The revenue coming from the promise to integrate internet technologies on Windows 95 and office would be recognized in the future by the revenue recognition policy. However, the development costs to provide these enhancements are already incurred in the and expensed in the company’s treatment for the software development costs. The combined effect of these two policies is the mismatch of expense with revenue.

5. What would be the effect on AOL’s 1994 and 1995 ending balance sheets if the company had followed the policy of expensing subscriber acquisition outlays instead of capitalizing them? What would be the effect of expensing subscriber acquisition costs on AOL’s 1995 income statement?

The first one is the income statement – Income statement is a financial statement that

18. Companies that expense R&D costs to the income statement rather than capitalize them on the balance sheet would have:

Computer Company F’s Net Income is 3.3% of its total sales, while Computer Company E’s Net Income is 6.2% of its total sales. Computer Company F’s lower net income could be a result of its “beginning to recover from a dramatic decline in its market share”, which is why I believe Computer Company F is Company 2.