Analyzing and Interpreting Income Components and Disclosures The income statement for Xerox Corporation follows.

Year ended December 31 $ millions	2015	2014	2013
Revenues
Sales	$4,748	$5,288	$5,582
Outsourcing, maintenance, and rentals	12,951	13,865	13,941
Financing	346	387	483
Total Revenues	18,045	19,540	20,006
Cost and expenses
Cost of sales	2,961	3,269	3,550
Cost of outsourcing, maintenance, and rentals	9,691	9,885	9,808
Cost of financing	130	140	163
Research, development, and engeineering expenses	563	577	603
Selling, administrative and general expenses	3,559	3,788	4,073
Restructuring and asset impairment charges	186	128	115
Amortization of intangible assets	310	315	305
Other expenses, net	233	232	146
Total costs and expenses	17,633	18,334	18,763
Income before income taxes and equity income	412	1,206	1,243
Income (tax) benefit expense	(23)	215	253
Equity in net income of unconsolidated affiliates	135	160	169
Income from continuing operations	570	1,151	1,159
(Loss) income from discontinued operations, net of tax	(78)	(115)	20
Net income	492	1,036	1,179
Less: Net income attributable to noncontrolling interests	18	23	20
Net income attributable to Xerox	$474	$1,013	$1,159

(a) Xerox reports several sources of income. Which of the following best describes how sales, service, and finance revenues should be recognized?

Sales, service, and finance revenues should be recognized when cash is collected.

Sales and service revenues are recognized when the sale is made or the service is performed. Finance revenues are recognized when the loan is initially made.

Sales, service, and finance revenues are recognized when earned, regardless of when cash is collected.

Sales and finance revenues are generally recognized when the sale is made and the loan is extended to the customer. Service revenues are deferred until the end of the service contract, at which time they are recognized in full.

(b) Compute the relative size of sales revenue and of revenue from outsourcing, maintenance, and rentals. Hint: Scale each type of revenue by total revenue.

Round percentage answers to one decimal place (ex: 0.2345 = 23.5%).

	Revenue in $ millions				As % of Total Revenue
	2015	2014	2013		2015	2014	2013
Sales	$Answer	$Answer	$Answer		Answer%	Answer%	Answer%
Outsourcing, maintenance, and rentals	$Answer	$Answer	$Answer		Answer%	Answer%	Answer%
Total Revenues	$Answer	$Answer	$Answer

(c) Which of the following best summarizes our conclusion about the potential use of "other expense" accounts to obscure actual financial performance.

We need not worry about the reporting of "other expense" accounts because the threshold for materiality is so low that the majority of items are not classified in such accounts.

Companies are not allowed to commingle income increasing and income decreasing accounts as this would reduce the usefulness of such an account.

GAAP does not permit the use of "other expense" accounts because they are not specific enough.

Companies are not required to separately disclose revenue and expense items unless they are deemed to be material. Such aggregation may reduce the usefulness of income statements