Question 1.) Explain why a company such as Microsoft would set aside some software sales revenues as "unearned"?
Question 2.) How would you determine how much sales revenue to set aside each quarter? Is this number easy to calculate?
Question 3.) Suppose the unearned revenue account is reduced by $100 million. Where do these dollars go? (The unearned revenue account is reduced by a debit. What account receives the offsetting credit?)
Question 4.) Describe how contracting and regulatory incentives might influence how much revenue is set aside as unearned. How might these incentives influence when the Unearned revenue account is reduced and by how much?
Question 5.) Why do analysts and investors pay such close attention to changes in Microsoft's Unearned revenue account?