Microsoft Case Study Capitalization Essay

* Partial Revenue Recognition method would recognize the sale and extended warranty at the time of sale. And the rest of the contract revenue will be deferred and recognized when the contract period is complete. This method is acceptable for financial reporting in few situations. The calculation is based on the estimated cost of the product and extended warranty. This method allows the company to recognize most of the revenue at the time of sale, and allows some future revenue recognition.

* On Income Statement for December 31, 2011, the number of Revenues, Cost of Goods Sold, Expenses and Net Income will go

1. The inventory at your company consists of computer software that the company has developed and is selling. You capitalized (rather than expensed) the cost of duplicating the software, the instruction manuals, and training material that are sold with the software.

1. What are the factors that likely explain the difference between Microsoft’s market value of equity and its reported book value of equity?

What is the dollar value of the company's assets? What is the dollar value of its net worth (owners' equity)?

For years 1983-1985, additional corporate assessment expense was given. This would lower Polymold’s earnings on their income statement. Another piece of data that was given is research and development expense. Without the CAD/CAM investment, research and development expense is $130,000. This is double to $260,000 without the CAD/CAM investment. This would lower earnings. We are also given the savings that the investment would yield. Without the CAD/CAM investment, there would still be savings – but not as much as with the CAD/CAM investment, which is due to the depreciation of the equipment and tax credits.

The inventory at your company consists of computer software that the company has developed and is selling. You capitalized (rather than expensed) the cost of duplicating the software, the instruction manuals, and training material that are sold with the software.

Assess the degree to which the firm’s accounting reflects the underlying business reality. Identify accounting distortions and evaluate their impact on profits and the sustainability of profits.

* Microsoft has retained $18.9 billion in earning over the years. It has over 2.5 times that amount in stockholder equity ($47.29 billion), no

Another question posed by the case was whether or not Microsoft’s conduct benefitted consumers. The senior group vice president of Microsoft, Paul Maritz believes Microsoft operations did benefit consumers, stating that Window’s popularity was due to Microsoft’s “efforts to innovate, evangelize and license the software cheaply” (Baron, p. 317). Microsoft’s alleged monopoly did benefit consumers when price and compatibility are considered, as the operating software was cheap and accessible by most consumers, especially given the fact so many applications were written specifically to interact with

in the most part, states that Microsoft is truly dismantling the competitive market. IBM and Apple created OS/2 and the Mac OS, respectively. Because of this “barrier of entry,” these top companies have not been able to “compete effectively with

C. What impact does Wiebold's stock split have on (1) total stockholders' equity, (2) total par value, (3) outstanding shares, and (4) book value per share?

Codification paragraph 720-15-45-1:  Because amortization expense of capitalized software costs relates to a software product that is marketed to others, the expense shall be charged to cost of sales or a similar expense category.

This report is issued in order to inform the public about Microsoft Corporation. We analyzed the profitability and liquidity of this company. In addition, we were able to provide recommendations for investments or credits in Microsoft for the best interest of the public.

Computer Company E’s Intangibles represent 0.0% of its total assets, while Computer Company F’s Intangibles are 1.2% of its total assets. Intangibles like patents (for highly differentiable devices) and a company brand (led by its charismatic founder) have value. I believe Computer Company F is Company 2.