Microsoft historically followed the practice of recognizing 25% of revenue from its Windows software over three or four years as it promises future upgrades and addons. With the launch of Vista in 2008, it changed the policy to record most of the revenue in the period in which the software was sold. In the third quarter for fiscal year 2008, Microsoft reported an increase in earnings of 65%. The increase came from sales of the new Vista program and also from the acceleration in revenue recognition.

Critically evaluate the revenue recognition policy adopted by Microsoft in accordance with AASB15 Revenue from Contracts with Customers.

2) Explain the decision of management to change the revenue recognition policy in terms of the debt hypothesis of Positive Accounting Theory.

500 words max

1. The following comparative income statement (in thousands of dollars) for the two recent fiscal years was adapted from the annual report of Calvin Motorsports, Inc., owner and operator of several major motor speedways, such as the Atlanta, Texas, and Las Vegas Motor Speedways.

   				Current Year			Previous Year
   Revenues:
   	Admissions			$97,412			$110,592
   	Event-related revenue			138,663			145,920
   	NASCAR broadcasting revenue			179,417			169,472
   	Other operating revenue			81,508			86,016
   		Total revenue		$497,000			$512,000
   Expenses and other:
   	Direct expense of events			$103,873			$104,960
   	NASCAR purse and sanction fees			119,777			130,560
   	Other direct expenses			25,347			23,040
   	General and administrative			188,363			218,624
   		Total expenses and other		$437,360			$477,184
   Income from continuing operations				$59,640			$34,816

   a. Prepare a comparative income statement for these two years in vertical form, stating each item as a percent of revenues. Round to one decimal place. Enter all amounts as positive numbers.

   Calvin Motorsports, Inc.
   Comparative Income Statement (in thousands of dollars)
   For the Years Ended December 31
   	Current Year Amount	Current Year Percent	Prior Year Amount	Prior Year Percent
   Revenues:
   Admissions	$97,412	%	$110,592	%
   Event-related revenue	138,663	%	145,920	%
   NASCAR broadcasting revenue	179,417	%	169,472	%
   Other operating revenue	81,508	%	86,016	%
   Total revenue	$497,000	%	$512,000	%
   Expenses and other:
   Direct expense of events	$103,873	%	$104,960	%
   NASCAR purse and sanction fees	119,777	%	130,560	%
   Other direct expenses	25,347	%	23,040	%
   General and administrative	188,363	%	218,624	%
   Total expenses and other	$437,360	%	$477,184	%
   Income from continuing operations	$59,640	%	$34,816	%

   Feedback

   b. While overall revenue

   • increased
   • decreased
   some between the two years, the overall mix of revenue sources did change somewhat. The NASCAR broadcasting revenue
   • increased
   • decreased
   as a percent of total revenue by 3 percentage points, while the percent of admissions revenue to total revenue
   • increased
   • decreased
   by 2 percentage points. Overall, it appears that income from continuing operations has significantly improved because of
   • aggressive cost cutting
   • a large increase in total revenue.

ROLE-PLAY EXERCISE On Command Corporation PROCESS You have been assigned a role in the On Command Corporation case. Please read the general information (Introduction) about the case. Read and understand your role. Your teammates have different roles. Due the situation, you need to work with your team to produce an employee meeting, you have 15 minutes to present the statement and conduct the meeting – see the link attached with information about an employee meeting (you need to create a statements, be prepare for questions, and defend your organization). Key Issues Sexual harassment Employee retaliation Appropriateness of product This role-play was developed by Mark Arvizu, Ira Baeringer, Mark Hess, Kelley Hoven, Bill Speights, and Jennifer Sawayda for and under the direction of O.C. and Linda Ferrell. © 2015 On Command Corporation Background (Everyone reads.) On Command Corporation (OCC) is a world-leading provider of interactive in-room entertainment, information, and business services to the lodging industry. The company annually serves more than 250 million guests through 950,000 rooms in approximately 3,450 hotel properties. OCC provides on-demand and, in some cases, scheduled in-room television viewing of major motion pictures and independent non-rated motion pictures for mature audiences, for which guests pay on a pay-per-view basis. Depending on the type of platform installed and the size of the hotel, guests can choose up to 50 different movies with an on-demand system, or eight to 12 movies with a scheduled system. In addition to pay-per-view movies, OCC offers other services such as short subjects (such as yoga and sporting packages), Internet services, music, game services, and other hotel and guest services. OCC obtains the non-exclusive rights to show recently released motion pictures from major motion picture studios during the time period after the initial theatrical release and before home video or cable distribution. The company also contracts with a variety of other vendors and distributors of in-room entertainment for the other products it sells to hotels and guests. OCC negotiates contracts with major hotel chains and individual hotels that involve agreement on the type and extent of movies and services that are offered. Programming choices are key for OCC to differentiate itself from competitors. As guests order movies, they are shown in their rooms and then appear on their bill at check-out. Depending on the contract with the hotel, it may receive some of the profits from the movie ordered. The PS4 games are the least profitable, while adult films are by far the most profitable. Although not disclosed directly, most of the company’s revenues are from adult movies. In fact, some analysts estimate that up to 80 percent of the revenues OCC generates are from its adult movie business. A new management team has come to On Command and is evaluating the company’s strategy and business plan. Although the company has been around for 10 years with 2014 revenues of $262 million, it still has yet to become profitable. Three recent events have re-kindled discussion about the true nature of the company’s products, as well as potential ethical issues. The first situation arose when several female employees complained to their superiors about feeling uncomfortable in the presence of a certain male colleague, Ted Jones, because of what they say are “lewd” remarks about women. Ted Jones is the senior adult film editor whose job it is to edit adult films to reduce graphic sexual content. When approached about his actions, Ted defended himself by denying the allegations. Due to lack of concrete proof, Ted was given a warning and the women who filed the complaint were told just to avoid Ted whenever possible. However, more complaints have surfaced, and the human resources department has decided to conduct an investigation. The second issue arose from a complaint filed by another female employee, Donna Wilson, working as an administrative assistant. She threated to file suit against the company because of the way she was treated. She was personally offended by the content of the adult movies. Although she had signed a document that clearly stated the nature of the videos available for viewing in her office upon her hire, she protested and said that the adult portion of the OCC product line should not be viewable in any of the corporate offices because it was sexually offensive, degraded women, and promoted sexual harassment in the workplace. She also insisted that the true extent of the sexual content was not explained to her when she signed the agreement. After hearing her complaint, her supervisor informed her of the release she had signed and also told her she had the clear choice not to work there. Since that time, Donna alleges, she claims she overheard her supervisor telling other workers to shun her at work because she was a troublemaker who refused to be a team player. She has also been cut out of meetings and claims the supervisor is constantly cutting her down in front of her colleagues. Finally, it has recently come to management’s attention that there has been a drop in revenue due to the deliberate refusal of many hotels to offer the adult film products as they would conflict with their quality, “family-friendly” image. The increase is this type of product censorship has led to a drop in revenue for OCC. At a recent meeting at Liberty Media (OCC’s parent company), several questions were raised about the ethical nature of OCC’s primary revenue source. Questions such as these were presented during the discussion regarding what to do with struggling OCC. A big question is whether it was masquerading as an entertainment company with many different product offerings to mask the fact that it is really in the adult movie business. Management is not sure whether it would be wise to disclose where most of its revenue comes from. Also, is the nature of how the company handles the editing of adult films internally encouraging sexual harassment and retaliation of female employees? The management team decided to develop a business strategy they could use going forward. AND I AM Pam Stone – General Counsel You joined OCC at the same time Chris Smith did. You both came from another subsidiary of Liberty Media, the parent company of OCC and several other entertainment type companies. Your specialty is more in the contract and merger and acquisition area. However, you have been dealing with a tremendous amount of employment-related issues. The human resources department has been significantly cut, meaning that you must often work in close proximity with Don Randall, the human resource manager. Chris has made you aware that all of the offices contain televisions, and employees have the same access as hotel guests. This includes the adult films. You have recently begun to research charges brought up by Ms. Wilson. You feel that adult movies should not be watched in the workplace unless they are being edited or viewed for possible selection. You learn that many employees frequently watch adult content in their offices, although most claim they do so during their break time. OCC has about 300 employees in the field who work directly with hotels to install the product as well as perform updates to products. Unfortunately, the system OCC currently uses does not allow for updates to be done electronically. The field service employees see the adult films during the updating process. OCC also manufactures its own “box” that allows the pay per systems to operate. As part of the testing process, the manufacturing employees must test each line of products by watching to make sure they work properly regular cable, short subjects, games, and adult films. The human resource manager Don Randall has provided you with waivers and disclaimers that all employees sign upon hire indicating that they may be exposed to adult film content during their employment. However, Ms. Wilson’s claims have gone beyond simply being offended. Now she is claiming that her supervisor has begun retaliating against her because she complained. This could certainly be grounds for a lawsuit if not handled properly. Don Randall has also asked you for assistance in handling some potential sexual harassment allegations he has heard. Since you came to OCC, you have been responsible for collecting and providing due diligence to an outside law firm to review for a possible merger and/or sale. You were intimately involved in the contract to secure an additional $60 million investment from Liberty Media. You have also been involved in many of the discussions with Chris Smith and executive VP and CFO Bill Moore as to what the company strategy needs to be.

case presentations what can be my answer for this case if I am the general counsel

it could be 1 or 2 slide it does not matter thank in advance

Vertical Analysis of Income Statement The following comparative income statement (in thousands of dollars) for the two recent fiscal years was adapted from the annual report of Calvin Motorsports, Inc., owner and operator of several major motor speedways, such as the Atlanta, Texas, and Las Vegas Motor Speedways. Current Year Previous Year Revenues: Admissions $94,400 $107,580 Event-related revenue 138,768 147,189 NASCAR broadcasting revenue 169,448 160,881 Other operating revenue 69,384 73,350 Total revenue $472,000 $489,000 Expenses and other: Direct expense of events $93,928 $94,377 NASCAR purse and sanction fees 118,000 126,162 Other direct expenses 27,848 23,961 General and administrative 178,416 218,583 Total expenses and other $418,192 $463,083 Income from continuing operations $53,808 $25,917 a. Prepare a comparative income statement for these two years in vertical form, stating each item as a percent of revenues. Round to one decimal place. Enter all amounts as positive numbers. Calvin Motorsports, Inc. Comparative Income Statement (in thousands of dollars) For the Years Ended December 31 Current Year Amount Current Year Percent Prior Year Amount Prior Year Percent Revenues: Admissions $94,400 % $107,580 % Event-related revenue 138,768 % 147,189 % NASCAR broadcasting revenue 169,448 % 160,881 % Other operating revenue 69,384 % 73,350 % Total revenue $472,000 % $489,000 % Expenses and other: Direct expense of events $93,928 % $94,377 % NASCAR purse and sanction fees 118,000 % 126,162 % Other direct expenses 27,848 % 23,961 % General and administrative 178,416 % 218,583 % Total expenses and other $418,192 % $463,083 % Income from continuing operations $53,808 % $25,917 % b. While overall revenue some between the two years, the overall mix of revenue sources did change somewhat. The NASCAR broadcasting revenue as a percent of total revenue by 3 percentage points, while the percent of admissions revenue to total revenue by 2 percentage points. Overall, it appears that income from continuing operations has significantly improved because of .

Vertical Analysis of Income Statement

The following comparative income statement (in thousands of dollars) for the two recent fiscal years was adapted from the annual report of Calvin Motorsports, Inc., owner and operator of several major motor speedways, such as the Atlanta, Texas, and Las Vegas Motor Speedways.

a. Prepare a comparative income statement for these two years in vertical form, stating each item as a percent of revenues. Round to one decimal place. Enter all amounts as positive numbers.

b. While overall revenue   some between the two years, the overall mix of revenue sources did change somewhat. The NASCAR broadcasting revenue   as a percent of total revenue by 3 percentage points, while the percent of admissions revenue to total revenue   by 2 percentage points. Overall, it appears that income from continuing operations has significantly improved because of  .

University of Richmond Professor Erik Craft analyzed the states’ pricing of vanity plates. He found that in California, where vanity plates cost an average of $28.75, the elasticity of demand was 0.52. In Massachusetts, where vanity plates cost $50, the elasticity of demand was 3.52.

1.) Assuming vanity plates have zero production cost and his estimates are correct, was each state collecting the maximum revenue it could from vanity plates? Explain your reasoning.

a.)Neither state is maximizing revenue. Maximum revenue is collected when elasticity is 1.

b.)Massachusetts is maximizing revenue but California is not because revenue is only maximized when elasicity is greater than 1.

d.)Neither state is maximizing revenue. Maximum revenue is collected when elasticity is zero.

2.) What recommendation would you have for each state to maximize revenue?

I would recommend that Massachusetts

b.) Lower its price

c.) not change its price

and California ___

a.) raise its price

c.) not change its price

Can anyone help please? These are the only options.

1) A tax professional must understand the relative weight of authority within the various tax law sources.

True or False

2) The Internal Revenue Code was codified for the first time in what year?

A. 1913.

B.1923.

C. 1939.

D. 1954.

E. 1986.

3) Rank the following in order of authority, according to the IRS article in your readings.

-Revenue Ruling

-Internal Revenue Code

-Private Letter Ruling

-Revenue Regulation

-Technical Memorandum

4) Treasury Regulations pick up where the Internal Revenue Code leaves off by providing official interpretation of the Internal Revenue Code by the US Department of Treasury.

True or False

5) Title 26 of the US Code contains the Internal Revenue Code. What is contained in Subtitle A?

A. Procedure & Administration

B. Estate & Gift Taxes

C. Income Tax

D. The Joint Committee On Taxation

6) Revenue Rulings carry the same legal force and effect as Regulations.

True or False

7) Which of the following sources has the highest tax validity?

A. Revenue Ruling.

B. Revenue Procedure.

C. Regulations.

D. Internal Revenue Code section.

E. None of the above.

8) Rules of tax law do not include Revenue Rulings and Revenue Procedures.

True or False

9) Both economic and social considerations can be used to justify:

A. Various tax credits, deductions, and exclusions that are designed to encourage taxpayers to obtain additional education.

B. Disallowance of any deduction for expenditures deemed to be contrary to public policy (e.g., fines, penalties, illegal kickbacks, bribes to government officials).

C. Favorable tax treatment for accident and health plans provided for employees and financed by employers.

D. Allowance of a deduction for state and local income taxes paid.

E. None of the above.

10) State Income Tax is always calcuated in the same manner as Federal Income tax.

True or False

Sales Returns

Which of the following statements is true relating to the allowance for sales returns?

a. Sales returns is treated as an expense in the income statement and, therefore, reduces profit for the period.

b. An excess of the amount by which the allowance for sales returns is increased compared with the actual returns for the period indicates the company may have inflated profit for the period.

c. The amount by which the allowance for sales returns is reduced during the period is recognized as a reduction of sales for the period, thus reducing profts.

d. Increasing the allowance for sales returns by an amount that is less than the actual returns recognized for the period may indicate either the company is attempting to increase profit for the period or its estimates that less of its products will be returned in the future.

Deferred Revenue
True or false: A reduction of the deferred revenue account can be interpreted as a leading indicator of lower future revenues. Explain

a. Fale. Revenue is recognized when the deferred revenue liability increases. If the deferred revenue account has decreased, more cash came in from customers and more revenue will be recgnized in the future.

b. True. Revenue is recognized when the deferred revenue liability decreases. If the deferred revenue account has decreased, less cash came in from customers and less revenue will be recognized in the future.

c. False. Revenue is recognized when the deferred revenue liability decreases. If the deferred revenue account has decreased, less cash came in from customers and more revenue will be recognized in the future.

d. True. Revenue is recognized when the deferred revenue liability decreases. If the deferred revenue account has decreased, more cash came in from customers and less revenue will be recognized in the future.

Foreign Exchange Effects on Sales  
True or false: A multinational company reports that a large amount of its sales is generated in foreign currencies that have strengthened vis-à-vis the $US. Consolidated revenues are likely lower than would have been reported in the absence of such a shift in exchange rates.

a. False. Strengthening foreign currencies implies a weakening $US. As the $US weakens, foreign currencies purchase less $US, resulting in an decrease in foreign currency-denominated sales, expense and profit. Consolidated revenues will therefore, likely be higher.

b. True. Strengthening foreign currencies implies a weakening $US. As the $US weakens, foreign currencies purchase less $US, resulting in an decrease in foreign currency-denominated sales, expense and profit. Consolidated revenues will therefore, likely be lower.

c. False. Strengthening foreign currencies implies a weakening $US. As the $US weakens, foreign currencies purchase more $US, resulting in an increase in foreign currency-denominated sales, expense and profit. Consolidated revenues will therefore, likely be higher.

d. True. Strengthening foreign currencies implies a weakening $US. As the $US weakens, foreign currencies purchase less $US, resulting in an increase in foreign currency-denominated sales, expense and profit. Consolidated revenues will therefore, likely be lower.

During March, Seconds Best Company had cash sales of $35,000 and sales on account of $210,000. In April, payments on account totaled $175,000. The journal entry prepared by Seconds Best to record the March sales would include a debit to: Multiple Choice

Cash for $35,000, debit to Accounts Receivable for $210,000, and credit to Sales Revenue for $245,000.

Cash for $35,000, debit to Deferred Revenue for $210,000, and credit to Sales Revenue for $245,000.

Cash for $35,000, debit to Accounts Payable for $210,000, and credit to Sales Revenue for $245,000.

Cash and credit to Sales Revenue for $35,000.

When the demand for a product is price elastic, a rise in its price causes total revenue to:

Select one:

a. fall because quantity sold remains the same and thus total revenue falls.

b. fall because the higher price per product is not enough to offset the decrease in revenue from the fall in quantity sold.

c. rise because the higher price per product will more than offset the fall in revenue due to the decrease in quantity sold.

d. fall because the quantity sold will decrease, therefore total revenue falls.