Following are the income statement and relevant footnotes from the \(10-\mathrm{K}\) of Intuil, Inc.

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a. Describe the differences in revenue recognition between produce sales and after-sale services

b. Intuit reports \(\$ 605,818\) thousand of Research and Development expense, up from \(\$ 472,516\) thousand in the prior year.
i. What kind of research activities would we expect for a company like Intuit?
ii. Given the kind of research activities described in part i, how does the accounting for Inuit's R\&D costs differ from the way that those costs would have been accounted for had they not been categorized as \(\mathrm{R} \& \mathrm{D}\) ?

c. Intuit's earnings per share (EPS) is \(\$ 1.41\) on a diluted basis, compared with its basic EPS of \(\$ 1.45\). What factor \((\mathrm{s})\) accounts for this dilution?

d. Intuit accounts for the sale of its Information Technology Solutions segment as a discontinued operation but does not give that designation for its Sale of Outsourced Payroll Assets. Why is Intuit not treating the Sale of Outsourced Payroll Assets as a discontinued operation?

e. Drawing on Intuit's income tax footnote, prepare a table in percentages showing computation of its effective tax rate for each fiscal year 2008, 2007 and 2006. What tax-related items, if any. would we not expect to continue into fiscal year 2009?

f. Intuit reports deferred tax assets of \(\$ 225,241\) thousand.
i. Describe how deferred tax assets relating to accruals and share-based compensation arise.
ii. Explain how deferred tax assets relating to loss carryforwards arise.
iii. Intuit reports a reduction of its deferred tax asset valuation allowance from \(\$ 2,527\) thousand in fiscal 2007 to \(\$ 0\) in fiscal 2008 . How does this reduction in its valuation allowance affect Intuit's income? (Hint: See its footnote for the deferred tax assets table.)

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INTUIT INC. CONSOLIDATED STATEMENTS OF OPERATIONS Twelve Months Ended July 31 (In thousands, except per share amounts) Net revenue Product... Service and other. Total net revenue. Costs and expenses 2008 2007 2006 $1,496,655 $1,447,392 $1,335,430 1,574,319 1,225,555 957,580 3,070,974 2,672,947 2,293,010 Cost of revenue Cost of product revenue.. 154,147 169,101 165,949 Cost of service and other revenue 414,100 309,419 232,588 Amortization of purchased intangible assets 56,011 30,926 8,785 Selling and marketing... 859,647 742,368 657,588 Research and development. 605.818 472,516 385,795 General and administrative. 294,966 291,083 267,233 Acquisition-related charges 35.518 19,964 9.478 Total costs and expenses. 2,420,207 2,035,377 1,727,416 Operating income from continuing operations. 650,767 637,570 565,594 Interest expense... (52,290) (27,091) Interest and other income 46,520 52,689 43,023 Gains and marketable equity securities and other investments, net.. 1,417 1,568 7,629 Gain on sale of outsourced payroll assets.... 51.571 31,676 Income from continuing operations before income taxes 697,985 696,412 616,246 Income tax provision. 245,579 251,607 234,592 Minority Interest expense, net of tax 1,656 1,337 691 Net income from continuing operations... 450,750 443,468 Net income (loss) from discontinued operations 26,012 Net income.. 476,762 (3,465) $ 440,003 $ 416,963 380,963 36,000 Basic net income per share from continuing operations... Basic net income (loss) per share from discontinued operations 1.37 $ 1.29 $ 1.10 0.08 (0.01) 0.10 Basic net income per share... 1.45 $ 1.28 $ 1.20 Shares used in basic per share amounts.. 328,545 342,637 347,854 Diluted net income per share from continuing operations.... Diluted net income (loss) per share from discontinued operations. 1.33 1.25 $ 1.06 $ 0.08 $ (0.01) $ 0.10 Diluted net income per share.... 1.41 $ 1.24 1.16 Shares used in diluted per share amounts. 339,268 355,815 360,471