Msft Accounting Essay - 659 Words

1. This question addresses the effect of Microsoft’s software capitalization policy on its financial statements. Ignore any potential tax effects. Estimate the effect of capitalizing software costs on Microsoft’s fiscal 1997, 1998, and 1999 income statements and balance sheets. Assume that 1) 60% of Microsoft’s research and development expenses were incurred after technological feasibility was established, 2) the average product life was two years, 3) the company had always capitalized these costs; and 4) the company begins amortization capitalized software costs at the beginning of the following fiscal year. Briefly speculate as to why Microsoft chose to expense all software costs as incurred rather than capitalizing a portion of these†¦show more content†¦Microsoft announced to integrate the internet technologies on Windows 95 and Office 97 giving an impetus to the sales of these products and a portion of these revenues should be deferred into the future. 3. What would be the combined effect of these two policies on Microsoft’s fiscal 1997, 1998, and 1999 financial statements? 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. 4. The case indicates that the company’s â€Å"market value† of equity at June 30, 1999 was $460 billion. Compare this to the company’s â€Å"book value† of equity. What factors likely explain the difference between these two values? Answer: The difference between the company’s market value and book value is a factor of the intangible assets like brand value, human capital, customer satisfaction and loyalty. These intangible assets become the factor of production providing future growth. Microsoft’s accounting policies had a negative impact on the book value of the company. 5. Would you characterize Microsoft’s overall financial reporting strategy as aggressive orShow MoreRelatedFinancial Analysis of Microsoft Corp. Essay2293 Words   |  10 Pagesratios the company is allowed to see how profitable the company. In addition it can serve as an examination of the overall performance of the company’s operations and how do these compare to past performances or other companies. The ratios in which accounting measures the profitability of a company are Profit Margin, Price over Earnings, Return on Equity and Return on Assets. In terms of Profit Margin it has a high ratio, which means that our company is turning 76.3% more of each dollar that we sellRead MoreDMBA620 Week 2 Fin Analysis Essay2581 Words   |  11 Pagesï » ¿Financial Accounting Individual Assignment: 1) What 3 items of important information does the income statement reveal about the financial performance of the company over the last three years?   Ans: The income statement lists the revenues minus expenses or costs of goods sold and operating expenses and will reveal a net income or net loss (Revenues – Expenses = Net Profit or Net Loss). Income statements show how much money a company made and spent over a period of time. Income Statements coverRead MoreBest Financial Statement1159 Words   |  5 Pagesquarterly basis as part of a public company s required SEC (Securities Exchange Commission) filings. Follow me, and let s go dig up Microsoft s (Nasdaq: MSFT) cash flow statement. 1) Click over to quotes.fool.com, or click the Quotes/Data tab at the top of this page. 2) On the left side of the page, under the Data heading, type MSFT, and click the SEC Filings button. (You should find yourself on this page.) 3) You now face a list of documents with funky form names. You re lookingRead MoreAnalysis of Microsofts Accounting Policy2832 Words   |  12 Pages| Case Study: Analysis of Microsoft’s Accounting Policies Introduction Microsoft’s business As the most widely recognized company in the world, Microsoft dominated the home computer operating system market with MS-DOS and Microsoft Windows, a graphical extension for MS-DOS in 1980s.The company was founded by Bill Gates and Paul Allen and went public on March 13th, 1986 with the price of $25.75 per share. Since going public, the company’s performance kept being outstanding. Microsoft notRead MoreIbm and Microsoft Financial Statement Analysis5499 Words   |  22 Pagesposition as a result of debt. Illustration 2 IBM Balance Sheet 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2007 IBM-Current Ratio 2008 2009 2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2007 2008 2009 9 Microsoft Balance Sheet IBM-Debt to Asset Ratio MSFT-Current Ratio MSFT-Debt to Asset Ratio The return on assets for Microsoft is quite high and consistent for the past three years 21.2% in 2007, 26% in 2008 and then a dip to 19.3% in 2009. I am sure Microsoft felt the 2009 dip was terrible but when you lookRead MoreMicrosofts Accounting Cycle Or Fiscal1568 Words   |  7 PagesMicrosoft is traded on the NASDAQ stock market using the ticker symbol is MSFT. The current stock price as of October 14th 2015 is $46.84. The trading range over the past year has been between $39.72 and $50.05. The dividend rate is $1.44 and their yield is 3.06. Satya Nadella is Microsoft CEO; he is only the third CEO in Microsoft’s history. Their headquarters are located at One Microsoft Way Redmond, Washington. Microsoft’s accounting cycle or fiscal year runs from July 1st to June 30th. The ending dateRead MoreFinancial Ratios Analysis Of Microsoft Corporation979 Words   |  4 Pagesmargin is the ratio of net income to sales and indicates how much of each dollar of sales is left over after all expenses. The ratio of net income to total assets measures the return on total assets (ROA) after interest and taxes. The ‘bottom line’ accounting ratio is the ratio of net income to common equity, which measures the return on common equity (ROE). Microsoft’s Profitability ratios can be illustrated in the chart below. Profitability ratios 2009 2010 2011 2012 2013 Gross profit 86. 34% 81Read MoreThe Microsoft Corporation and Apple Computers, Inc.: Annual Report Comparision4025 Words   |  17 Pagesmust manage extensive assets and liabilities. Since both companies report large amounts of income, the matter of accounting checks and balances becomes more complicated than many smaller companies, but equally as important. Financial reports and the audits of these reports are public information and serve to provide a process to decrease errors and omissions and questionable accounting practices. History of Microsoft and Apple Microsoft. The idea of Microsoft was born in the minds of Bill GatesRead MoreFinancial Accounting 504 Final Project Essay1514 Words   |  7 PagesFinancial Accounting 504 23-Jun-13 Professor Chung Oracle v Microsoft Final Course Project As noted in Wikipedia Oracle is headquartered in Redwood, California. It was founded in 1977 and is the worlds third largest soft wear developer in sales. According to Yahoo Finance Oracle is a multi-faceted operation. Oracle provides a vast amount of services for the internet and computer. It provides cloud applications, IT consulting services, licenses middleware software which includes database andRead MoreApple Financial Analysis Essay example10900 Words   |  44 PagesFinancial Analysis Project APPLE INC. Rev 1.1 A Financial Analysis Project By Josie Chavez Submitted to Kendra Huff, Ph.D. Assistant Professor of Accounting and Finance College of Business Administration Texas Aamp;M University-Kingsville BUSINESS FINANCE 3338 Spring 2011 TABLE OF CONTENTS LIST OF TABLES iii LIST OF FIGURES v 1. CORPORATE OVERVIEW 1 1.1 Overview of Industry 1 1.2 Overview of Corporation 2 1.2.1 Product/Service Description 4 1.2