Refer to Apple’s financial statements in Appendix A to answer the following.

1. Identify and write out the revenue recognition principle as explained in the chapter.

2. Review Apple’s footnotes (in Appendix A and/or from its 10-K on its website) to discover how it applies the revenue recognition principle and when it recognizes revenue. Report what you discover.

3. What is Apple’s profit margin for fiscal years ended September 26, 2015, and September 27, 2014.

4. For the fiscal year ended September 26, 2015, what amount is credited to Income Summary to summarize its revenues earned?

5. For the fiscal year ended September 26, 2015, what amount is debited to Income Summary to summarize its expenses incurred?

6. For the fiscal year ended September 26, 2015, what is the balance of its Income Summary account before it is closed?

Fast Forward 7. Access Apple’s annual report (10-K) for fiscal years ending after September 26, 2015, at its website

(Apple.com) or the SEC’s EDGAR database (SEC.gov). Assess and compare the September 26, 2015, fiscal year profit margin to any subsequent year’s profit margin that you compute.

Data From  Appendix A Refer to Apple’s financial statements in Appendix A to answer the following.
Required
1. Assume that the amounts reported for inventories and cost of sales reflect items purchased in a form ready for resale. Compute the net cost of goods purchased for the year ended September 26, 2015.
2. Compute the current ratio and acid-test ratio as of September 26, 2015, and September 27, 2014.
Interpret and comment on the ratio results. How does Apple compare to the industry average of 1.5 for the current ratio and 1.25 for the acid-test ratio?

3. Access Apple’s financial statements (Form 10-K) for fiscal years ending after September 26, 2015, from its website (Apple.com) or the SEC’s EDGAR database (SEC.gov). Recompute and interpret the current ratio and acid-test ratio for these current fiscal years.

Data From Apple Appendix Financial Statements

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Years ended Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) September 26, 2015 September 27, 2014 September 28, 2013 Net sales Cost of sales Operating expenses $ 233,715 $ 182,795 $ 170,910 140,089 112,258 106,606 Gross margin Research and development Selling, general and administrative Total operating expenses Operating income 93,626 70,537 64,304 8,067 6,041 4,475 14,329 11,993 10,830 22,396 18,034 15,305 71,230 52,503 48,999 Other income, net 1,285 980 1,156 Income before provision for income taxes 72,515 53,483 50,155 Provision for income taxes 19,121 13,973 13,118 $ 53,394 39,510 37,037 Net income Earnings per share: Basic Diluted 9.28 6.49 5.72 9.22 6.45 5.68 5,753,421 6,085,572 6,477,320 5,793,069 6,122,663 6,521,634 $ 1.98 $ 1.82 1.64 See accompanying Notes to Consolidated Financial Statements. Shares used in computing earnings per share: Basic Diluted Cash dividends declared per common share