The following information was reported in a recent balance sheet issued by Microsoft Corporation: 1. The book

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The following information was reported in a recent balance sheet issued by Microsoft Corporation:

1. The book value of property and equipment is listed at $3.35 billion (net of depreciation). Related notes to the financial statements reveal that accumulated depreciation on property and equipment totals $5.02 billion.

2. Accrued compensation of $2.33 billion is listed as a liability.

3. Short-term unearned revenue is reported at $10.78 billion, whereas long-term unearned revenue is reported at $1.87 billion. The short-term figure will be converted to revenue within a year. The long-term figure will be converted to revenue over several years. Related notes to the financial statements reveal that the company engages in multiyear leasing of its software products.

a. Determine the original historical cost of the property and equipment reported in Microsoft Corporation’s balance sheet.

b. Four types of adjusting entries are illustrated in Exhibit 4–1 (page 142). Explain which type of adjusting entry resulted in the company’s accrued compensation figure.

c. Explain why Microsoft Corporation reports unearned revenue in its balance sheet. Why might the company report short-term unearned revenue separately from long-term unearned revenue?


Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Financial and Managerial Accounting the basis for business decisions

ISBN: 978-0078111044

16th edition

Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello

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