Quiz #1: Revenue Recognition and Accounts Receivable

Please refer to the attached Consolidated Statements of Income, Consolidated Balance Sheets,
and Notes to Consolidated Financial Statements from Yahoos 2006 Annual Report. Note
that Yahoo reports their 2006 financial numbers in the LAST column. You may remove the
attachments for your convenience. Show calculations for partial credit.
1.

a. As of December 31, 2006 what is the amount that customers owe Yahoo? (2
points)

b. As of December 31, 2006 what is the amount that Yahoo does not expect to
collect from its customers? (2 points)

2.

a. For fiscal 2006 what amount did Yahoo record as Provision for Bad Debts?
How, if at all, does this affect the income statement for 2006? (2 points)

b. What is the amount of write-offs relating to receivables for 2006? How, if at

all, does this affect the income statement for 2006? (2 points)

3. a. As of December 31, 2006 what is the amount of deferred revenues? Why is it

reported as a liability? (2 points)

b. What kind(s) of events and transactions could account for the changes in deferred
revenues? (2 points)

4. Suppose that Yahoo had always chosen full revenue recognition (i.e., recognized
100% of the revenues at the point of sale and did NOT defer any revenues)
i) How, if at all, would the balance sheet be different at the end of fiscal 2006?
(4 points) Be specific as to items and amounts. [You may assume that the
cost of services associated with the deferred revenues to be zero. Ignore
taxes]

ii) How, if at all, would the income statement be different for fiscal 2006? Be
specific as to amounts (4points)