1. Refer to information in Note 1Description of Business and Accounting Policies in the Notes to the Consolidated Financial Statements related to Accounts Receivable.a. Does Amazon.com account for the possibility that some customers or vendors may not fully pay for previous purchases on credit? If so, how? If not, why not?b. Assume that all receivables are Accounts Receivable (i.e., there are no other or vendor receivables). How is the amount reported on the balance sheet different from the ending balance of Accounts Receivable in a given year (Hint: there is a keyword that should tip you off)? Calculate the actual ending balance of Accounts Receivable in 2011 and 2010.c. Suppose that in 2011, Amazon.com receives cash payments for customer purchases made on account in prior periods totaling $1,600 million. Evaluate how well the managers of Amazon.com accounted for the possibility that some customers may not fully pay for purchases made on credit. That is, did the managers of Amazon.com overestimate or underestimate how much they would actually receive from customers and vendors for previous purchases on account?Requirement 2: Briefly answer each question with no more than 2-3 sentences each. If necessary, you may use appropriate T-accounts (e.g., Accounts Receivable) to help explain your responses.2. Refer to information in Note 1Description of Business and Accounting Policies and Note 3Fixed Assets in the Notes to the Consolidated Financial Statements.a. What method of depreciation does Amazon.com use, and why isnt Depreciation Expense on the income statement?b. Note that each class of assets has a separate Accumulated Depreciation contra-asset account. Further assume that Depreciation Expense related to the Technology and Infrastructure class of assets for 2011 is $392 million. What other transaction related to this class of assets must have happened in 2011?Requirement 3: Briefly answer questions (a) and (b) above. In addition, draw a T-account (you will need to determine which account to analyze in order to answer the above question!) to support your response to question (b), highlighting the amount of the additional transaction.3. Refer to the summarization of the legal proceedings in Note 7Commitments and Contingencies.a. Why is it necessary to disclose this information in the footnotes?b. In most cases, there are no specifications regarding how an individual lawsuit against Amazon.com may have a monetary impact in the future, but the suits are discussed at length. Therefore, what is the relative likelihood that these cases will result in a ruling that is unfavorable for Amazon.com?c. Suppose that one lawsuit filed against Amazon.com was settled on November 13, 2011 (the first casah payment is made some time during 2012). Amazon.com was compelled to pay the claimant for infringement damages of $600 million in equal installments over the next three years. How should Amazon.com account for this outcome? How could this impact the financial position of Amazon.com?Requirement 4: Briefly answer questions (a) and (b). Recall that there are specific criteria relating to disclosing contingent liabilities. For question (c), specify how this scenario would impact the 2011 Statement of Operations. In addition, how would this outcome change the 2011 Balance Sheet? What amounts would be added to which section the balance sheet, and how would they be classified? Finally, how would this event alter the liquidity of Amazon.com (you do not need to show calculationsjust explain)?4. Refer to the Consolidated Balance Sheet and Note 1Description of Business and Accounting Policies as they relate to investment activities. The notes clearly specify how Amazon.com accounts for various investing activities.a. On the Balance Sheet, which line items include Short-term investments? Which line item includes Equity-method investments?b. Assume that Marketable Securities on the balance sheet contain investments that are accounted for as trading securities. The ending balance in 2010 is $4,985 million. Suppose that during 2010, Amazon.com sells off $1,000 million of these investments, and purchases additional investments at a cost of $1,218. What other transaction or adjustment should have occurred to arrive at the ending balance of $4,307 million?Requirement 5: Answer question (a) briefly. For question (b), create a T-Account for the marketable securities. Clearly label the beginning and ending balances and the effects of Amazon.coms transactions during 2011 on this account.5. Refer to the Consolidated Balance Sheet and Consolidated Statement of Cash Flows for 2011. Note that no shares of preferred stock have been issued.a. Suppose that during 2011, Amazon.coms Board of Directors decided to issue preferred stock (100 million shares of $100 par, $7 preferred stock) in 2012 to raise additional capital (assume they sell at par and all shares are bought). What impact would this have on the 2012 Statement of Cash Flows?b. Given the companys debt position, would this be a sound business decision for Amazon.coms managers?Requirement 6: For questions in part (a), calculate the amount of the preferred stock dividend; how would this impact Cash Flows Provided (Used) by Operating, Investing, and/or Financing activities? For question (b), compute the companys liquidity using the Quick Ratio as of the end of 2011, both with and without the sale of preferred stock (assume they pay the annual dividend in February 2012). Given this ratio, would issuing the preferred stock be a good decision?6. Refer to the Consolidated Statements of Operations for 2009, 2010, and 2011.a. In Microsoft Excel or a similar program, replicate the following line items: Net Sales, Gross Profit, Total operating expenses (without COGS), Income from Operations, and Net Income for all three years, but add an additional column after each year. In the additional column, perform a vertical analysis of these income line items of Amazon.com. In 2011, what percent of revenue is retained by Amazon.com after (i) reselling its products; (ii) accounting for necessary and ongoing business activities; and (iii) after all business activities? How do the results of operations in 2010that is, these various income line itemscompare to the operations of previous years?b. Assume Wal-Mart, Inc., a competitor of Amazon.com, reports the following results of operations. How do the two companies compare?Walmart, Inc.Consolidated Statements of OperationsFor the Year Ended December 31, 2011(Amounts in millions) Net Sales $ 418,952 Cost of Sales 314,946 Gross Profit 104,006 Total Operating Expenses 81,361 Income from Operations 25,542 Net Income $ 16,389Requirement 7: For (a), first present your replication and vertical analysis of Amazon.com,Inc. for all three years. In one sentence, indicate the percent of revenue retained for each of the three income specifications for 2011. In 1-2 additional sentences, explain whether operations have significantly changed over the three years. For requirement (b), prepare a Common Size comparison of Amazon.com and Wal-Mart. Explain some possible causes of the differences in Gross Profit and Net Income.7. Refer to the Consolidated Financial Statements and the Notes to the Consolidated Financial Statements.Requirement 8: Refer to the list of qualitative/enhancing characteristics and underlying principles of accounting below (right-hand column). For each, identify one item contained within the Consolidated Financial Statements or Notes to the Consolidated Financial Statements of Amazon.com that follows these characteristics or principles. These items may include: (a) specific account names; (b) accounting treatments; (c) specific notes; or (d) parts of the financial statements themselves, such as the format, heading, etc.For example, Accounts Receivable follows the Revenue principle because Amazon.com recognizes revenue when it is earned, not necessarily when Cash is received (you may not use this example as one of your answers).Accounting InformationCharacteristics/Principles Followed1Reliability2Relevance3Time period concept4Consistency5Matching principle6Revenue principle7Conservatism principle8Full disclosure principleThe link to the statement to refer to is The link to the financial statements ishttp://www.sec.gov/cgi-bin/viewer?action=view&cik=1018724&accessionnumber=0001193125-12-032846&xbrltype=vThis are the nly information I have to use.