• Netflix, Inc. incurred $500 million in content production costs during the year, of which $300 million was capitalized and the rest expensed. The company reported the following financial information:
  • Total Content Production Costs: $500 million
  • Total Revenue: $25 billion
  • Operating Income: $5 billion
  • Net Income: $2 billion

• Requirements:
  1. Compute Netflix's net income after accounting for capitalized and expensed content production costs.
  2. Prepare an income statement showing the impact of capitalized and expensed costs on net income.
  3. Analyze the implications of capitalizing content production costs versus expensing them immediately.
  4. Discuss the disclosure requirements for content production costs in Netflix's financial statements.
  5. Evaluate Netflix's content strategy and its financial impact on profitability and subscriber growth.