CT2.1. Financial Reporting FINANCIAL REPORTING PROBLEM: Apple Inc. The financial statements of Apple Inc. are presented in Appendix A at the end of this textbook Instructions Answer the following questions using the financial statements and the notes to the financial statements. (a) What were Apple's total current assets at September 27, 2014, and September 28, 2013? (b) Are the assets included in current assets listed in the proper order? Explain. (c) How are Apple's assets classified? (d) What were Apple's current liabilities at September 27, 2014, and September 28, 2013? References Appendix Specimen Financial Statements: Apple Inc. e towel doo Once each year, corporation communicates to its ockholders and other interested parties trying a complete set of facial The company's operations for the year and its plans for the future. Many p e o p l e. co m products and new buildings. Yet the basic function of every report is to report financial information, almost all of which is a product of the corporation The content and organization of competerparts have become a clading the publisee r hereported reports th of fice accounting system on w the e e t Lame to the Stockholders - Management Discussion and Analysis - Financial Sects Notes to the Financial Statements Management o f ancial Reporting Manage Report on troverancial Reporting Report of Independent Registered Accounting Selected Facial th e The official Sehing of the report is called a Form 10-K, which 2014 Form 10-K Te App Fem 10-K, including 1. Go to p aveserapple.com means the fac t the 3. See the 10- port de Sewer 29, 2014 4 The Notes to Consolidated Financial Statements CONSOLIDATED STATEMENTS OF OPERATIONS Rearch and Tog Cowo CONSOLIDATED STATEMENTS OF OPERATIONS In milions, except number of shares which are reflected in thousands and per share amounts) Years ended September 28 September 27, September 29 $ 182.795 112.258 70.537 $ 170.910 106.808 $ 156,508 87 948 64,304 6041 3.381 Net sales Cost of sales Gross margin Operating expenses Research and development Seling general and administrative Total operating expenses Operating income Other income expensej, net Income before provision for income taxes Provision for income taxes Net income 10.040 11.993 18.034 4,475 10.830 15.30 13.421 55.241 52 500 48.999 1.158 50.155 13.118 56.763 13.973 39.510 $ Earnings per share: Basic Dised $ $ 8.49 6.45 $ $ 5.72 5.88 $ $ 6.38 6.31 Shares used in computing comings per share: 6.085.572 6,122,663 6,477,320 6.521.634 6.543,728 6,617,483 Duted Cash dividends declared per common share $ 1.32 $ 1.54 $ 0.38 See accompanying Notes to Consolidated Frencial Statements CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years ended September 27. September Septem $ 39,510 $ 37.037 $ 41.733 (112) Net noome Other comprehensive income Change in foreign currency translation, not of tax effects of $50, $35 and $13, respectively Change in recognized ain esondere instruments Change in favoue of derivatives of tax bon p es of $207. 6351) and $73, respectively Adjustment for net losses gains realized and included in net income net of tax expense benefit of $38.5.255 and 5220, respectively (137) (112) la 1,390 149 1.539 and $13. respectively Change in unrecognized gains losses on derivative instruments Change in fair value of derivatives, net of tax benefitpense of $2971 $1351) and $73, respectively Adjustment for net losses gains realized andincluded in net income net of tax expense benefit of :36)$255 and $220, respectively Total change in unrecognized gains fosses ondervative Instruments, net of tax Change in unrealized gains losses on marketable securities Change in fair value of marketable securities.net of tax benefit expense of S(1531. $458 and 1421. respectively Adjustment for net losses/gainsi realized and included in net income net of tax expense/benefit of $71,582 and $68, respectively Total change in unrealized gains fosses on martable securities net of tax Total other comprehensive income fossi Total comprehensive income g 285 (791) 715 (134 (131) (114 151 1922) 601 1553 970) $ 41,063 $ 36.087 $ 41,789 See accompanying Notes to Consolidated Francial Statements CONSOLIDATED BALANCE SHEETS in millions, except number of shares which are reflected in thousands and par value September 27, Sector 2 ASSETS Current assets: Cash and cash equivalents Short-term marketable securities Accounts receivable, los alowances of $86 and 599, respectively Inventories Deferred tax assets Vendor non-trade receivables Other current assets Total current assets Long-term marketable securities Property, plant and equipment, net Goodwil Acquired intangible assets.net Other assets Total acts LIABILITIES AND SHAREHOLDERS' EQUITY: Current lite Accords payable $ 13,844 11,233 17.460 2,111 4,318 9.750 9.808 68,531 130,162 20,624 4,616 4.142 3.754 $ 231.839 $ 14.259 26.287 13,102 1.764 3,453 7.539 8.92 73.286 106.215 16.597 1.577 4.179 5.146 $ 207.000 $ 30,106 $ 22.367 TUNO $ $ 22,367 13,856 7,435 0 LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable Accrued expenses Deferred revenue Commercial paper Total current liabilities Deferred revenue-non-current Long-term debt Other non-current liabilities Total liabilities Commitments and contingencies Shareholders' equity: Common stock and additional paid-in capital, $0.00001 par value; 12,600,000 shares authorized: 5,866,161 and 6.294,494 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income/loss) Total shareholders' equity Total liabilities and shareholders' equity 30,196 18,453 8.491 6.308 63,448 3,031 28,987 24.826 120.292 43,658 2,625 16.960 20,208 83,451 23,313 87.152 1,082 111,547 $ 231.839 19,764 104,256 (471) 123.549 207.000 $ See accompanying Notes to Consolidated Financial Statements, CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In milions, except number of shares which are reflected in thousands) Common Stock and Addisonal Paid-in Capital Shares Amount 6.504.937 $ 13,331 0 Retained Earnings Accumulated Other Comprehensive Income Los) $ 443 Total Shareholders Equity $ 76,615 41.733 $ 62.841 41.733 0 56 0 (2.523) 0 1.740 2,523) 1,740 200 (762) Balances as of September 24, 2011 Net income Other comprehensive income/loss) Dividends and dividend equivalents declared Share-based compensation Common stock issued, net of shares withheld for employee taxes Tax benefit from equity awards, including transfer pricing adjustments Balances as of September 29, 2012 Net income Other comprehensive incoma/los) Dividends and dividend equivalents declared Repurchase of common stock Share-based compensation 6.674.458 16.422 499 101280 37,037 1970 1.151 118.210 37,037 1970) (10.676 (22.950) 2.253 (328.837 (10,676) (22.960) 0 2.253 (22,950) 1328.837) 0 0 2253 (22,950) 2,253 OOO 48.873 (143) (444) (587) 6.294,494 19.784 104,256 39.510 Repurchase of common stock Share-based compensation Common stock issued, net of shares withheld for employee tas Tax benefit from equity awards, including transfer pricing adjustments Balances as of September 28, 2013 Net income Other comprehensive income foss) Dividends and dividend equivalents declared Repurchase of common stock Share-based compensation Common stock issued, net of shares withheld for employee tages Tax benefit from equity awards, including transfer pricing adjustments Balances as of September 27, 2014 1.232 123.549 39,510 1.563 (11.215) (45.000) 2,863 488,677 (11,215) (45,000) 0 2.863 60.344 (49) (390) 736 5.866. 161 $ 23,313 $ 87,152 $111.547 See accompanying Notes to Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF CASH FLOWS September 27, Years ended September 28, September 29, 2013 $ 10,746 $ 9815 $ 14.259 39,510 37,037 41.733 7.946 2.863 2147 6.757 2,253 1.141 3.277 1.740 4.405 (4,232 2,172 1973) (5,551) (15) TO Cash and cash equivalents, beginning of the year Operating activities: Net income Adjustments to reconcio net income to cash generated by operating activities: Depreciation and amortization Share-based compensation expense Deferred income tax expense Changes in operating assets and abilities: Accounts receivable.net Inventories Vendor non-trade receivables Other current and non-current assets Accounts payable Deferred revenue Other current and non-current liabilities Cash generated by operating activities Investing activities: Purchases of marketable securities Proceeds from maturities of marketable securities Proceeds from sales of marketab securities Paymerits made in connection with business acquisitions, net (2.220) 167 5.938 1,480 8,010 1.080 2.340 1.450 4,521 53,856 3,162) 4,467 2,824 2.552 50.858 59.713 (217.128) 18.810 189 301 3.765) (148,489 20,317 104, 130 (4001 (151 232) 13,035 09.770 3 50) 2012 (15) 223 167 Years ended September 27. September 28, September 29, 2014 2013 Cash and cash equivalents, beginning of the year $ 14259 $ 10,746 $ 9.815 Operating activities: Net income 39,510 37,037 41.733 Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization 7.946 6,757 3.277 Share-based compensation expense 2.863 2.253 1,740 Deferred income tax expense 2.347 1,141 4,405 Changes in operating assets and abilities: Accounts receivable, net (4.232) (2,172) (5,551) Inventories (76) (1973) Vendor non-trade receivables (2.220) (1.414 Other current and non-current assets 1,080 3.162) Accounts payable 5.938 2,340 4,467 Deferred revenue 1,460 1,459 2,824 Other current and non-current liabilities 6.010 4,521 2.552 Cash generated by operating activities 59.713 53.666 50,856 Investing activities: Purchases of marketable securities (217.128) (148,489) (151.232) Proceeds from maturities of marketable securities 18,810 20.317 13,035 Proceeds from sales of marketable securities 189,301 104,130 99.770 Payments made in connection with business acquisitions.net (3.765) (496) (350) Payments for acquisition of property, plant and equipment (9.571) (8,165) (8.295) Payments for acquisition of intangible assets (242) (911) (1.107 Other (160) (48) Cash used in investing activities (22,579) (33,774) (48.227) Financing activities: Proceeds from issuance of common stock 730 530 Excess tax benefits from equity awards 739 1,351 Taxes paid related to net share settlement of equity awards (1.158) (1.082) (1.226) Dividends and dividend equivalents paid (11,126) (10.564) (2.488) Repurchase of common stock 145,000) (22.860) Proceeds from issuance of long-term debt, net 11.960 16.896 Proceeds from issuance of commercial paper, net 6.306 Cash used in financing activities 37,549) (16,379) (1.698 Increase/ decrease in cash and cash equivalents (415) 3,513 931 Cash and cash equivalents, end of the year $ 13.844 $14.259 $ 10.746 Supplemental cash flow disclosure Cash paid for income taxes, net $ 10,026 $ 0,128 $ 7.682 Cash paid for interest $ 339 S 0 0 See accompanying Notes to Consolidated Financial Statements. 665 701