Expand Your Critical Thinking Financial Reporting Problem: Apple Inc.
CT4.1 The financial statements of Apple Inc. are presented in Appendix A. Instructions 1. Using the consolidated income statement and balance sheet, identify items that may result in adjustments for deferrals. 2. Using the consolidated income statement, identify two items that may result in adjustments for accruals. 3. What was the amount of depreciation and amortization expense for 2018 and 2017? (You will need to examine the notes to the financial statements or the statement of cash flows.) Where were accumulated depreciation and amortization reported? 4. What was the cash paid for income taxes during 2018, reported at the bottom of the consolidated statement of cash flows? What was income tax expense (provision for income taxes) for 2018?
Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) September 29, 2018 $59.531 Years ended September 30, 2017 $48351 September 24, 2016 $45,687 Net income Other comprehensive income/(loss): Change in foreign currency translation, net of tax effects of $(1), $(77) and $8, respectively (525) 75 523 1315 7 Change in unrealized gains/losses on derivative instruments: Change in fair value of derivatives, net of tax benefit/(expense) of $(149). $(478) and $(7), respectively Adjustment for net (gains) losses realized and included in net income, net of tax expense/(benefit) of $(104), $475 and $131, respectively Total change in unrealized gains/losses on derivative instruments, net of tax 382 905 (1,477) (162) (741) (734) (3.407) (782) ( 1.582 Change in unrealized gains/losses on marketable securities: Change in fair value of marketable securities, net of tax benefit/(expense) of $1,156, $425 and 8(863), respectively Adjustment for net (gains) losses realized and included in net income, net of tax expense/(benefit) of $21, $35 and $(31), respectively Total change in unrealized gains/losses on marketable securities, net of tax (64) 56 1,638 (3.406) Total other comprehensive income/(loss) Total comprehensive income (3,026) $56.505 (784) $47567 979 $46,666 See accompanying Notes to Consolidated Financial Statements. See accompanying Notes to Consolidated Financial Statements. Apple Inc. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) September 29. 2018 September 30, 2017 ASSETS: Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net Inventories Vendor non-trade receivables Other current assets Total current assets $25.913 40,388 23.186 3.956 25,809 12,087 131,339 $ 20,289 53,892 17,874 4,855 17.799 13.936 128,645 Non-current assets: Marketable securities Property, plant and equipment, net Other non-current assets Total non-current assets Total assets 170,799 41304 22,283 234 386 $365.725 194.714 33.783 18,177 246,674 $375.319 LIABILITIES AND SHAREHOLDERS' EQUITY: LIABILITIES AND SHAREHOLDERS' EQUITY: Current linbilities: Accounts payable Other current liabilities Deferred revenue Commercial paper Term debt Total current liabilities Non-current liabilities: Deferred revenue Term debt Other non current liabilities Total non current liabilities Total liabilities $ 55.888 32,687 7.543 11,964 8.784 116,866 $ 44,242 30.551 7.548 11,977 6,496 100,814 93.735 45.180 141.712 258.578 97,207 40,415 140.458 241.272 Commitments and contingencies Shareholders' equity: Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized: 4.754.986 and 5.126,201 shares issued and outstanding respectively Retained earnings Accumulated other comprehensive income/(loss) Total shareholders' equity Total liabilities and shareholders' equity 40,201 70,400 (3.454) 107.147 $365.725 35.867 98.330 (150) 134,047 $375.319 See accompanying Notes to Consolidated Financial Statements, Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Years ended September 29, September 30, September 24, 2018 2017 2016 Net sales $ 265,595 $ 229,234 $ 215,639 Cost of sales 163,756 141,048 131,376 Gross margin 101,839 88,186 84,263 Operating expenses: Research and development Selling, general and administrative Total operating expenses 11,236 16,705 30,941 11,581 15,261 26,842 10,045 14,194 24,239 Operating income Other income/expense), net Income before provision for income taxes Provision for income taxes Net income 70,898 2,005 72,903 13,372 59,531 61,344 2.745 64,089 15.738 48.351 60,024 1,348 61,372 15,685 $ 45,687 S $ Earnings per share: Basic Diluted $ 12.01 $ $ 9.27 9.21 8.35 8.31 $ 11.91 $ $ Shares used in computing earnings per share: Basic Diluted 4,955,377 5,000,109 5,217,242 5,251,692 5,470,820 5,500,281 See accompanying Notes to Consolidated Financial Statements. Accumulated Other Comprehensive Income/(Loss) $ (345) 979 Apple Inc. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In millions, except number of shares which are reflected in thousands and per share amounts) Common Stock and Additional Paid-In Capital Shares Amount Retained Earnings Balances as of September 26, 2015 5,578,753 $27,416 $92,284 Net income 45,687 Other comprehensive income/loss) Dividends and dividend equivalents declared at $2.18 per share or RSU (12,188) Repurchase of common stock (279,609) (29,000) Share-based compensation 4,262 Common stock issued, net of shares withheld for employee taxes 37,022 (806) (419) Tax benefit from equity awards, including transfer pricing adjustments 379 Balances as of September 24, 2016 5,336,166 31,251 96,364 Net income 48,351 Other comprehensive income/(loss) Dividends and dividend equivalents declared at $2.40 per share or RSU (12,803) Repurchase of common stock (246,496) (33,001) Share-based compensation 4,909 Common stock issued, net of shares withheld for employee taxes 36,531 (913) (581) Tax benefit from equity awards, including transfer pricing adjustments 620 Balances as of September 30, 2017 5,126,201 35,867 Cumulative effect of change in accounting principle 278 Net income 59,531 Other comprehensive income/loss) Dividends and dividend equivalents declared at $2.72 per share or RSU (13,735) Repurchase of common stock (405,549) (73,056) Share-based compensation 5,443 Common stock issued, net of shares withheld for employee taxes 34:334 (1,109) Balances as of September 29, 2018 4.754.986 $40,201 $70,400 Total Shareholders' Equity $119.355 45,687 979 (12,188) (29,000) 4,262 (1,225) 379 128,249 48,351 (784) (12,803) (33,001) 4,909 (1,494) 620 134,047 634 (784) 98.330 (150) (278) (3,026) 59,531 (3,026) (13,735) (73,056) 5,443 (2,057) $107,147 (948) $(3,454) See accompanying Notes to Consolidated Financial Statements. Apple Inc . CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) September 29, 2018 $20,289 Years ended September 30, 2017 $20,484 September 24, 2016 $21,120 59,531 48,351 45,687 10,903 5,340 (62,590) (444) 10,157 4,840 5,966 (166) 10,505 4,210 4,938 486 (5,322) 828 (8,010) (423) 9,175 (44) 38,490 77.434 (2,093) (2,723) (4,254) (5,318) 8,966 (626) 1,125 64,225 527 217 (51) 1,055 2,117 (1,554) (1,906) 66,231 Cash and cash equivalents, beginning of the year Operating activities: Net income Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization Share-based compensation expense Deferred income tax expense/(benefit) Other Changes in operating assets and liabilities: 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 marketable securities Payments for acquisition of property, plant and equipment Payments made in connection with business acquisitions, net Purchases of non-marketable securities Proceeds from non-marketable securities Other Cash generated by/(used in) investing activities Financing activities: Proceeds from issuance of common stock Payments for taxes related to net share settlement of equity awards Payments for dividends and dividend equivalents Repurchases of common stock Proceeds from issuance of term debt, net Repayments of term debt Change in commercial paper, net Cash used in financing activities Increase/(Decrease) in cash and cash equivalents Cash and cash equivalents, end of the year Supplemental cash flow disclosure: Cash paid for income taxes, net Cash paid for interest (71,356) 55,881 47,838 (13,313) (721) (1,871) 353 (745) 16,066 (159,486) 31,775 94,564 (12,451) (329) (521) 126 (124) (46,446) (142,428) 21,258 90,536 (12,734) (297) (1,388) (924) (45,977) 555 (1,874) (12,769) (32,900) 28,662 669 (2.527) (13,712) (72,738) 6,969 (6,500) (37) (87,876) 5,624 $25,913 495 (1,570) (12,150) (29,722) 24,954 (2,500) (397) (20,890) (3,500) 3,852 (17,974) (195) (636) $20,289 $20,484 $10,417 $3,022 $11,591 $ 2,092 $10,444 $ 1,316 idotod Tinoninl Stotomonto Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) September 29, 2018 $59.531 Years ended September 30, 2017 $48351 September 24, 2016 $45,687 Net income Other comprehensive income/(loss): Change in foreign currency translation, net of tax effects of $(1), $(77) and $8, respectively (525) 75 523 1315 7 Change in unrealized gains/losses on derivative instruments: Change in fair value of derivatives, net of tax benefit/(expense) of $(149). $(478) and $(7), respectively Adjustment for net (gains) losses realized and included in net income, net of tax expense/(benefit) of $(104), $475 and $131, respectively Total change in unrealized gains/losses on derivative instruments, net of tax 382 905 (1,477) (162) (741) (734) (3.407) (782) ( 1.582 Change in unrealized gains/losses on marketable securities: Change in fair value of marketable securities, net of tax benefit/(expense) of $1,156, $425 and 8(863), respectively Adjustment for net (gains) losses realized and included in net income, net of tax expense/(benefit) of $21, $35 and $(31), respectively Total change in unrealized gains/losses on marketable securities, net of tax (64) 56 1,638 (3.406) Total other comprehensive income/(loss) Total comprehensive income (3,026) $56.505 (784) $47567 979 $46,666 See accompanying Notes to Consolidated Financial Statements. See accompanying Notes to Consolidated Financial Statements. Apple Inc. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) September 29. 2018 September 30, 2017 ASSETS: Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net Inventories Vendor non-trade receivables Other current assets Total current assets $25.913 40,388 23.186 3.956 25,809 12,087 131,339 $ 20,289 53,892 17,874 4,855 17.799 13.936 128,645 Non-current assets: Marketable securities Property, plant and equipment, net Other non-current assets Total non-current assets Total assets 170,799 41304 22,283 234 386 $365.725 194.714 33.783 18,177 246,674 $375.319 LIABILITIES AND SHAREHOLDERS' EQUITY: LIABILITIES AND SHAREHOLDERS' EQUITY: Current linbilities: Accounts payable Other current liabilities Deferred revenue Commercial paper Term debt Total current liabilities Non-current liabilities: Deferred revenue Term debt Other non current liabilities Total non current liabilities Total liabilities $ 55.888 32,687 7.543 11,964 8.784 116,866 $ 44,242 30.551 7.548 11,977 6,496 100,814 93.735 45.180 141.712 258.578 97,207 40,415 140.458 241.272 Commitments and contingencies Shareholders' equity: Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized: 4.754.986 and 5.126,201 shares issued and outstanding respectively Retained earnings Accumulated other comprehensive income/(loss) Total shareholders' equity Total liabilities and shareholders' equity 40,201 70,400 (3.454) 107.147 $365.725 35.867 98.330 (150) 134,047 $375.319 See accompanying Notes to Consolidated Financial Statements, Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Years ended September 29, September 30, September 24, 2018 2017 2016 Net sales $ 265,595 $ 229,234 $ 215,639 Cost of sales 163,756 141,048 131,376 Gross margin 101,839 88,186 84,263 Operating expenses: Research and development Selling, general and administrative Total operating expenses 11,236 16,705 30,941 11,581 15,261 26,842 10,045 14,194 24,239 Operating income Other income/expense), net Income before provision for income taxes Provision for income taxes Net income 70,898 2,005 72,903 13,372 59,531 61,344 2.745 64,089 15.738 48.351 60,024 1,348 61,372 15,685 $ 45,687 S $ Earnings per share: Basic Diluted $ 12.01 $ $ 9.27 9.21 8.35 8.31 $ 11.91 $ $ Shares used in computing earnings per share: Basic Diluted 4,955,377 5,000,109 5,217,242 5,251,692 5,470,820 5,500,281 See accompanying Notes to Consolidated Financial Statements. Accumulated Other Comprehensive Income/(Loss) $ (345) 979 Apple Inc. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In millions, except number of shares which are reflected in thousands and per share amounts) Common Stock and Additional Paid-In Capital Shares Amount Retained Earnings Balances as of September 26, 2015 5,578,753 $27,416 $92,284 Net income 45,687 Other comprehensive income/loss) Dividends and dividend equivalents declared at $2.18 per share or RSU (12,188) Repurchase of common stock (279,609) (29,000) Share-based compensation 4,262 Common stock issued, net of shares withheld for employee taxes 37,022 (806) (419) Tax benefit from equity awards, including transfer pricing adjustments 379 Balances as of September 24, 2016 5,336,166 31,251 96,364 Net income 48,351 Other comprehensive income/(loss) Dividends and dividend equivalents declared at $2.40 per share or RSU (12,803) Repurchase of common stock (246,496) (33,001) Share-based compensation 4,909 Common stock issued, net of shares withheld for employee taxes 36,531 (913) (581) Tax benefit from equity awards, including transfer pricing adjustments 620 Balances as of September 30, 2017 5,126,201 35,867 Cumulative effect of change in accounting principle 278 Net income 59,531 Other comprehensive income/loss) Dividends and dividend equivalents declared at $2.72 per share or RSU (13,735) Repurchase of common stock (405,549) (73,056) Share-based compensation 5,443 Common stock issued, net of shares withheld for employee taxes 34:334 (1,109) Balances as of September 29, 2018 4.754.986 $40,201 $70,400 Total Shareholders' Equity $119.355 45,687 979 (12,188) (29,000) 4,262 (1,225) 379 128,249 48,351 (784) (12,803) (33,001) 4,909 (1,494) 620 134,047 634 (784) 98.330 (150) (278) (3,026) 59,531 (3,026) (13,735) (73,056) 5,443 (2,057) $107,147 (948) $(3,454) See accompanying Notes to Consolidated Financial Statements. Apple Inc . CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) September 29, 2018 $20,289 Years ended September 30, 2017 $20,484 September 24, 2016 $21,120 59,531 48,351 45,687 10,903 5,340 (62,590) (444) 10,157 4,840 5,966 (166) 10,505 4,210 4,938 486 (5,322) 828 (8,010) (423) 9,175 (44) 38,490 77.434 (2,093) (2,723) (4,254) (5,318) 8,966 (626) 1,125 64,225 527 217 (51) 1,055 2,117 (1,554) (1,906) 66,231 Cash and cash equivalents, beginning of the year Operating activities: Net income Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization Share-based compensation expense Deferred income tax expense/(benefit) Other Changes in operating assets and liabilities: 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 marketable securities Payments for acquisition of property, plant and equipment Payments made in connection with business acquisitions, net Purchases of non-marketable securities Proceeds from non-marketable securities Other Cash generated by/(used in) investing activities Financing activities: Proceeds from issuance of common stock Payments for taxes related to net share settlement of equity awards Payments for dividends and dividend equivalents Repurchases of common stock Proceeds from issuance of term debt, net Repayments of term debt Change in commercial paper, net Cash used in financing activities Increase/(Decrease) in cash and cash equivalents Cash and cash equivalents, end of the year Supplemental cash flow disclosure: Cash paid for income taxes, net Cash paid for interest (71,356) 55,881 47,838 (13,313) (721) (1,871) 353 (745) 16,066 (159,486) 31,775 94,564 (12,451) (329) (521) 126 (124) (46,446) (142,428) 21,258 90,536 (12,734) (297) (1,388) (924) (45,977) 555 (1,874) (12,769) (32,900) 28,662 669 (2.527) (13,712) (72,738) 6,969 (6,500) (37) (87,876) 5,624 $25,913 495 (1,570) (12,150) (29,722) 24,954 (2,500) (397) (20,890) (3,500) 3,852 (17,974) (195) (636) $20,289 $20,484 $10,417 $3,022 $11,591 $ 2,092 $10,444 $ 1,316 idotod Tinoninl Stotomonto
