Microsoft is the leading developer of software in the world. To continue to be successful Microsoft must generate new products, which requires significant amounts of cash. Shown below is the current asset and current liability information from Microsoft??s June 30, 2009, balance sheet (in millions). Following the Microsoft data is the current asset and current liability information for Oracle (in millions), another major software developer.

Part 1 (Cash and Cash Equivalents)Instructions(a) What is the definition of a cash equivalent? Give some examples of cash equivalents. How do cash equivalents differ from other types of short-term investments?(b) Calculate (1) the current ratio and (2) working capital for each company for 2009 and discuss your results.(c) Is it possible to have too many liquid assets?Part 2 (Accounts Receivables)Microsoft provided the following disclosure related to its accounts receivable.

Instructions(a) Compute Microsoft??s accounts receivable turnover ratio for 2009 and discuss your results.Microsoft had sales revenue of $58,437 million in 2009.(b) Reconstruct the summary journal entries for 2009 based on the information in the disclosure.(c) Briefly discuss how the accounting for bad debts affects the analysis in Part 2(a).

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Microsoft Corporation Balance Sheets (partial) As of June 30 (in millions) Current assets 2009 2008 $ 6,076 $10,339 13,323 13,589 5.991 Cash and equivalents Short-term investments 25,371 Accounts receivable 11.192 Other 6,641 $49,280 $43,242 Total current assets $27,034 $29,886 Total current liabilities Oracle Balance Sheets (partial) As of May 31 in millions) Current assets 2009 2008 $ 8,995 $ 8,262 2,781 5,127 1,933 Cash and equivalents Short-term investments 3,629 Receivables 4,430 Other current assets 1,527 $18,581 $18,103 Total current assets $ 9,149 $10,029 Current llabilities