Question
Following are the 2016 income statements for Apple Inc. and Microsoft Corporation, competitors in the computer industry. Use these financial statements to answer the required.
Following are the 2016 income statements for Apple Inc. and Microsoft Corporation, competitors in the computer industry. Use these financial statements to answer the required.
APPLE INC. Income Statements | |||
(in millions) | Sep. 24, 2016 | Sep. 26, 2015 | Sep. 27, 2014 |
Net sales | $ 215,639 | $ 233,715 | $ 182,795 |
Cost of sales | 131,376 | 140,089 | 112,258 |
Gross margin | 84,263 | 93,626 | 70,537 |
Operating expenses: |
|
|
|
Research and development | 10,045 | 8,067 | 6,041 |
Selling, general and administrative | 14,194 | 14,329 | 11,993 |
Total operating expenses | 24,239 | 22,396 | 18,034 |
Operating income | 60,024 | 71,230 | 52,503 |
Other income/(expense), net | 1,348 | 1,285 | 980 |
Income before provision for income taxes | 61,372 | 72,515 | 53,483 |
Provision for income taxes | 15,685 | 19,121 | 13,973 |
Net income | $ 45,687 | $ 53,394 | $ 39,510 |
MICROSOFT CORPORATION Income Statements | |||||
(in millions) | Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2014 | ||
Revenue |
|
|
| ||
Product | $61,502 | $75,956 | $72,948 | ||
Service and other | 23,818 | 17,624 | 13,885 | ||
Total revenue | 85,320 | 93,580 | 86,833 | ||
Cost of revenue |
|
|
| ||
Product | 17,880 | 21,410 | 16,681 | ||
Service and other | 14,900 | 11,628 | 10,397 | ||
Total cost of revenue | 32,780 | 33,038 | 27,078 | ||
Gross margin | 52,540 | 60,542 | 59,755 | ||
Research and development | 11,988 | 12,046 | 11,381 | ||
Sales and marketing | 14,697 | 15,713 | 15,811 | ||
General and administrative | 4,563 | 4,611 | 4,677 | ||
Impairment, integration and restructuring | 1,110 | 10,011 | 127 | ||
Operating income | 20,182 | 18,161 | 27,759 | ||
Other income (expense), net | (431) | 346 | 61 | ||
Income before income taxes | 19,751 | 18,507 | 27,820 | ||
Provision for income taxes | 2,953 | 6,314 | 5,746 | ||
Net income | $16,798 | $12,193 | $22,074 |
Required:
a) How do Apple Inc. and Microsoft Corporation account for R&D expenditures?
b) Apple Inc.s and Microsoft Corporations R&D expense includes many different types of costs. List three specific costs that could be included in R&D expense on the income statement.
c) What trend do you notice in the R&D expenses of each company over time?
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