a. In 1999, Microsoft Corporation announced that the Securities and Exchange Commission (SEC) was investigating some of its accounting practices. Exhibit 17.1 presents the current liability section of Microsoft's comparative balance sheet at the end of the first quarter of its 2000 fiscal year. Can you see a reason for the SEC's concern?
b. Exhibit 17.1 also gives the cash from operations section of Microsoft's cash flow statement for the same quarter. Microsoft reported revenues of $5.384 billion in the quarter to September 30, 1999, and $4.193 billion for the corresponding quarter for 1998.
Does it appear that the SEC's concerns were justified in the 1999period?

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MICROSOFT CORPORATION Partial Balance Sheets in millions) Sept. 30, 1999 S 997 1.136 June 30, 1999 S 874 1,607 Current liabilities Accounts payabie Accrued compensation ncome taxes payable Unearned revenue Other 396 4,129 4,239 Total current iabilities $3,718 Partial Cash How Statements in millions) Three Months Ended September 30 1998 $1,683 179 (160) 1.010 (765) $2,191 Depreciation Gains i sales Unearned revenue Recognition of unearned revenue from prior periods Other current liabillties Accounts receivable Other current assets (156) (1,363) 345) 64 341 Net cash from operations 1,990 2,584