Analyzing Unearned Revenue Changes

Take-Two Interactive Software, Inc. (TTWO) is a developer, marketer, publisher, and distributor of video game software and content to be played on a variety of platforms. There is an increasing demand for the ability to play these games in an online environment, and TTWO has developed this capability in many of its products. In addition, TTWO maintains servers (or arranges for servers) for the online activities of its customers.

TTWO considers that its products have multiple performance obligations. The first performance obligation is to provide software to the customer that enables the customer to play the game offline or online. That performance obligation is fulfilled at the point at which the software is provided to the customer. In addition, TTWO’s customers benefit from “online functionality that is dependent on our online support services and/or additional free content updates.” This second performance obligation is fulfilled over time, and the estimated time period for which an average user plays the software product is judged to be a faithful depiction of the fulfillment of this performance obligation.

At the beginning of the first quarter of fiscal year 2018, TTWO had a deferred net revenue liability of $566,141 thousand. When that quarter ended on June 30, 2018, the deferred net revenue liability was $466,429 thousand. Revenue for the quarter was $387,982 thousand.

a. What would cause the deferred net revenue liability to go down over the quarter?

TTWO must have recognized less in revenue than it sold during the quarter.

TTWO must have recognized the same amount in revenue as it sold during the quarter.

TTWO must have recognized more in revenue than it sold during the quarter.

None of these are correct.

b. What was the amount of online-enabled games purchased by TTWO’s customers in the first quarter ended June 30, 2018?

Answer (in thousands)


Were the purchases greater or less than the revenue recognized in the income statement?

Purchases were less than the revenue recognized in the income statement.

Purchases were greater than the revenue recognized in the income statement.

Purchases were equal to the revenue recognized in the income statement.

Not enough infomation is provided to answer the question.

Analyzing Unearned Revenue Changes Take-Two Interactive Software, Inc. (TTWO) is a developer, marketer, publisher, and distributor of video game software and content to be played on a variety of platforms. There is an increasing demand for the ability to play these games in an online environment, and TTWO has developed this capability in many of its products. In addition, TTWO maintains servers (or arranges for servers) for the online activities of its customers. TTWO considers that its products have multiple performance obligations. The first performance obligation is to provide software to the customer that enables the customer to play the game offline or online. That performance obligation is fulfilled at the point at which the software is provided to the customer. In addition, TTWO’s customers benefit from “online functionality that is dependent on our online support services and/or additional free content updates.” This second performance obligation is fulfilled over time, and the estimated time period for which an average user plays the software product is judged to be a faithful depiction of the fulfillment of this performance obligation. At the beginning of the first quarter of fiscal year 2018, TTWO had a deferred net revenue liability of $509,527 thousand. When that quarter ended on June 30, 2018, the deferred net revenue liability was $419,786 thousand. Revenue for the quarter was $349,184 thousand.

a. What would cause the deferred net revenue liability to go down over the quarter?

-TTWO must have recognized less in revenue than it sold during the quarter.

- TTWO must have recognized the same amount in revenue as it sold during the quarter.

- TTWO must have recognized more in revenue than it sold during the quarter.

- None of these are correct.

b. What was the amount of online-enabled games purchased by TTWO’s customers in the first quarter ended June 30, 2018? Answer (in thousands)

Were the purchases greater or less than the revenue recognized in the income statement?

- Purchases were less than the revenue recognized in the income statement.

- Purchases were greater than the revenue recognized in the income statement.

- Purchases were equal to the revenue recognized in the income statement.

- Not enough information is provided to answer the question.

1. Please explain why you would or would not think each of the following variables to be normally distributed. [Hint: For normally distributed variable, most of the data are around the middle value and frequency of observations keeps falling as you move away from the middle in both directions]. a. Retirement age of the U.S workers. b. Household income in the U.S. in 2018. c. Height of U.S. adults in 2018. d. Birthweight of girls in the U.S. in 2018. e. Please state an example each of left-skewed and right-skewed variables and justify your answer.

1. The multiplier effect

Consider a hypothetical economy where there are no taxes and no international trade. Households spend $0.50 of each additional dollar they earn and save the remaining $0.50. If there are no taxes and no international trade, the oversimplified multiplier for this economy is

.

Suppose investment spending in this economy decreases by $100 billion. The decrease in investment will lead to a decrease in income, generating a decrease in consumption that decreases income yet again, and so on.

Fill in the following table to show the impact of the change in investment spending on the first two rounds of consumption spending and, eventually, on total output and income.

Now consider a more realistic case. Specifically, assume that the government in our hypothetical economy collects income taxes. In this case, the multiplier will be   the oversimplified multiplier you found earlier.

Suppose that the price level in our economy remains the same and that there is still no international trade. Now, however, the government decides to implement an income tax of 5% on each dollar of income. The MPC and MPS, however, remain the same as before. In this case, after accounting for the impact of taxes, the multiplier in this economy is     , and a $100 billion decrease in investment spending will lead to a      billion   in output.

You own a company. Here are the actual results from 2018 and the projected results for 2019.

Additional information:

Presented below are the Income Statement and Balance Sheet for December 31, 2018.

Additional Information:

• Cost of goods sold is equal to the total of items purchased in the first quarter.
• Selling and Administrative expenses consist entirely of wages
• Depreciation is at the rate of $30,000 per quarter
• Miscellaneous accruals are not expected to change in the first quarter of 2019
• Current portion of long-term debt is $210 due in March 2019. The debt payment is made once a year.

REQUIRED:
Part 1: You want to estimate your company’s cash balances for the first three months of 2019. Use the following information and create a monthly cash budget for January through March. Your sales are 25% for cash, and the remainder are paid within 30-days. All purchases are on 60-day credit terms.

Prepare a spreadsheet (and all spreadsheets MUST have formulas!!! The only time you may enter a number is when the number is given in the problem. All other numbers must be the result of a formula in a cell.) Determine if you will have enough cash to invest or if you’ll need to arrange for a loan.

. For each of the following goods, briefly describe the allocation mechanism that is most commonly used in the United States:

            a. Pepsi cola

            b. gasoline

            c. medical care

The power point presentation that the cost of goods sold is often the most challenging to compute. What reasons may cause these challenges in determining the cost ?

The Parker Piano Company purchased a Delivery Truck on January 1, 2025 for $50,000 which included all costs to get the asset ready for use. The truck has an anticipated life of 100,000 miles or 4 years. The estimated residual value at the end of the assets service life is expected to be $2,000. For assets of this type, the company utilizes the straight-line depreciation method.

1. Record the purchase of the asset.

2. Complete the depreciation table below.

3. Record the entry for December 31, 2025 to record the depreciation for the year.

4. Suppose the company sells the van on December 31, 2027 for $18,000 cash. Provide the journal entry to record the sale.