Summary:
On Thursday January 13, 2011 it was reported that Intel Corporation had the best fourth-quarter earnings in company history. Both the Revenue and profit have set new records. Intel has earned revenue of $43.6 billion, operating income of $15.9 billion, and a net income of $11.7 billion. Paul Otellini, Intel president and CEO, said “2010 was the best year in Intel’s history. We believe that 2011 will be even better.” Intel has recently posted its earning per share of 59 cents which was higher than forecasted of 53 cents per share. On Monday Intel has announced a $1.5 billion, six-year contract with Nvidia, graphics chip-maker, which will allow Intel to access for graphic chips.
Connection:
In chapter 3 it mainly discusses about the accounting cycle which describes how transactions are measured, recorded, and communicated to users in the form of financial statements. Transaction analysis is when a transaction occurs and accountants would decide which accounts would be affected. It was announced that Intel Corporation had the best fourth-quarter earnings in company history with revenue of $43.6 billion. This transaction would affect the accounts revenue and cash. T accounts are devices used to represent a ledger account. If this transaction were to be recorded on T accounts, revenue would be a credited $43.6 billion on right hand side of the T account, and the corresponding account, cash, debited $43.6 billion on the left hand side of the T account. Temporary accounts such as expenses and revenues would be closed in the Income summary accounts. Intel has revenue of $43.6 billion and expenses approximately $31.9 billion. An Income Summary balance can be calculated by $43.6billion-31.9billion= $11.7 billion. Income summary accounts would then be closed in the retained earnings account. Assume Intel have retained earnings of $60 billion and $5 billion of dividends declared. An updated balance for the retained earnings account can be calculated $60 billion+$11.7 billion-$5 billion=$66.7 billion. This article also relates to the Multi-step income statement. Multi-step income statement is an income statement which revenues and expenses from different sources are shown in different sections of the statement. It was reported Intel have an operating income of $15.9 billion. Therefore this income would be the total income from Intel operations such as Sales or service, cost of good or from other operating revenues and expenses.
Reflection:
In my opinion I think Intel is a very strong and successful company therefore it was able to have such an extraordinary result for the year. However I disagree Intel to have a $1.5 billion, six-year agreement with Nvidia, graphic chip-maker, that will allow Intel access to patents for graphic chips. I believe spending $1.5 billion would be too much since deficit is happening to many companies around the world. I suggest Intel should keep its money incase of mistakes that occurs. It would be an advantage to have a strong cash flow, and cash stash left in the company since problems can be solved more quickly and easily. With a strong cash flow it would give Intel an opportunity to attract potential investors to invest into Intel. Therefore there could be a huge possibility for shares of Intel to rise from investments. After a huge cash stash have been generated from potential investor’s investment, a portion of the money can then be thought to be spent into marketing or R&D because of high competitions. Intel’s chief rival, chip maker AMD(AMD,Fortune 500) have recently announced the immediate resignation of CEO Dirk Meyer. Therefore I strongly believe $1.5 billion should not be spent, and instead to wait for AMD’s next decision.
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