INSTRUCTIONS: Welcome to Week 1. Please answer the question below. Moreover, you must also comment on at least two other students' work (your own submission is worth 7 points and the comments to other students' posts are worth 3 points). Remember to respond in essay (paragraph) format. Support your answer with applicable sources. Note: Discussion entries and comments must be substantive and detailed. As usual, creativity is highly rewarded. Please review the Discussion Rubric Waiting until the last minute to submit your discussion robs the entire class a chance to comment on your submission and will NOT earn you full credit. Your original submission is due 24 hours before the due date to allow the last 24 hours for comments. You must cite your work appropriately. Submissions without sources/citations will incur a 5-point penalty. See citation resources here QUESTION: Access the 2019 annual report of Apple by clicking here. REQUIRED: 1. Go to Page 31 to access the balance sheet Scroll down to Current Liabilities How much was the deferred revenue balance as of Sep 29, 2018? How much was the deferred revenue balance as of Sep 28, 2019? What is deferred revenue? 2. Go to Page 26 and read the portion under "Warranty Costs". Briefly describe whether you agree with this accounting treatment 3. Go to Page 51 and review the table under "Accrued Warranty and Guarantees Think of that table as a T- account for simplicity as follows: Beginning balance on the Credit Side QUESTION: Access the 2019 annual report of Apple by clicking here. REQUIRED: 1. Go to Page 31 to access the balance sheet " " " Scroll down to Current Liabilities How much was the deferred revenue balance as of Sep 29, 2018? How much was the deferred revenue balance as of Sep 28, 2019? What is deferred revenue? 2. Go to Page 26 and read the portion under "Warranty Costs". Briefly describe whether you agree with this accounting treatment. 3. Go to Page 51 and review the table under "Accrued Warranty and Guarantees". Think of that table as a T- account for simplicity as follows: Beginning balance on the Credit Side Accruals as additions on the Credit side Actual claims as subtractions from the Debit Side . Ending balance on the Credit Side Does it look identical to what we are doing in this class? Briefly comment Total non-current assets Total assets Current liabilities: Accounts payable Other current liabilities Deferred revenue Commercial paper Tem debt Total current liabilities Non-current liabilities: Term debt Other non-current liabilities Total non-current liabilities Total liabilities LIABILITIES AND SHAREHOLDERS' EQUITY: D 338,516 365,725 46,236 $ 55,888 37,720 33,327 5,522 5,966 5,980 11,964 10,260 8,784 105,718 115,929 91,807 93,735 50,503 48.914 142,310 142,649 248,028 258,578 Commitments and contingencies Shareholders' equity: Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 4,443,236 and 4,754,986 shares issued and outstanding, respectively Retained earnings 45,174 40,201 45,898 70,400 Accumulated other comprehensive income/(loss) (584) (3,454) Total shareholders' equity Total liabilities and shareholders' equity 90,488 107,147 $ 338,516 $ 365,725 See accompanying Notes to Consolidated Financial Statements. Apple Inc. 1 2019 Form 10-K 131 Apple Inc. 19, 9.28.2019 X C. Using Apple's 2019 Financial Stix | 4 Akali Ma 11 - bng Ngc b tr es/doc financials/2019/ar/ 10-K-2019-(As-Filed).pdf + change, the Company's SSPs and the future rate of related amortization for product-related bundled services and unspecified software upgrade rights related to future sales of these devices could change. Factors subject to change include the nature of the product-related bundled services and unspecified software upgrade rights offered, their estimated value and the estimated period they are expected to be provided. Apple Inc, 1 2019 Form 10-K 125 Valuation of Manufacturing-Related Assets and Estimation of Inventory Purchase Commitment Cancellation Fees The Company invests in manufacturing-related assets, including capital assets held at its suppliers' facilities and prepayments provided to certain of its suppliers associated with long-term agreements to secure the supply of inventory. The Company also accrues estimated purchase commitment cancellation fees related to inventory orders that have been canceled or are expected to be canceled. The Company's estimates of future product development plans and demand for its products are the key inputs in the determination of the recoverability of manufacturing-related assets and the assessment of the adequacy of any purchase commitment cancellation fee accruals. If there is an abrupt and substantial decline in estimated demand for one or more of the Company's products, a change in the Company's product development plans, or an unanticipated change in technological requirements for any of the Company's products, the Company may be required to record write-downs or impairments of manufacturing-related assets or accrue purchase commitment cancellation fees. Warranty Costs The Company offers limited warranties on its new hardware products and on parts used to repair its hardware products, and customers may purchase extended service coverage, where available, on many of the Company's hardware products. The Company accrues the estimated cost of warranties in the period the related revenue is recognized based on historical and projected warranty claim rates, historical and projected cost per claim and knowledge of specific product failures outside the Company's typical experience. The Company regularly reviews these estimates and adjusts the amounts as necessary. If actual product failure rates or repair costs differ from estimates, revisions to the estimated warranty liabilities would be required. Income Taxes The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater-than-50% likelihood of being realized upon ultimate settlement. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of GAAP and complex tax laws. Resolution of these uncertainties in a manner inconsistent with management's expectations could have a material? Share-Based Compensation The following table shows share-based compensation expense and the related income tax benefit included in the Consolidated Statements of Operations for 2019, 2018 and 2017 (in millions) 2019 2018 2017 Share-based compensation expense $ 6.068 S 5,340 S 4,840 Income tax benefit related to share-based compensation expense S (1.967) $ (1,893) $ (1,632) As of September 28, 2019, the total unrecognized compensation cost related to outstanding RSUs and stock options was $10.5 billion, which the Company expects to recognize over a weighted-average period of 2.5 years. Note 10-Commitments and Contingencies Accrued Warranty and Guarantees The following table shows changes in the Company's accrued warranties and related costs for 2019, 2018 and 2017 (in millions): 2019 2018 2017 Beginning accrued warranty and related costs $ 3,692 $ Cost of warranty claims Accruals for product warranty (3.857) 3,735 3.834 $ (4.115) 3,973 3,702 (4.322) 4.454 Ending accrued warranty and related costs 3.570 $ 3,692 $ 3,834 The Company offers an iPhone Upgrade Program, which is available to customers who purchase a qualifying iPhone in the U.S., the UK. and mainland China. The iPhone Upgrade Program provides customers the right to trade in that iPhone for a specified amount when purchasing a new iPhone, provided certain conditions are met. The Company accounts for the trade-in right as a guarantee liability and recognizes arrangement revenue net of the fair value of such right, with subsequent changes to the guarantee Sability recognized within net sales. Concentrations in the Available Sources of Supply of Materials and Product Although most components essential to the Company's business are generally available from multiple sources, certain components are currently obtained from single or limited sources. The Company also competes for various components with other participants in the markets for smartphones, personal computers, tablets and other electronic devices. Therefore, many components used by the Company, including those that are available from multiple sources, are at times subject to industry-wide shortage and significant commodity pricing fluctuations. The Company uses some custom components that are not commonly used by its competitors, and new products introduced by the Company often utilize custom components available from only one source. When a component or product uses new technologies, initial capacity constraints may exist until the suppliers' yields have matured or their manufacturing capacities have increased. The continued availability of these components at acceptable prices, or at all, may be affected if suppliers decide to concentrate on the production of common components instead of components customized to meet the Company's requirements. The Company has entered into agreements for the supply of many components; however, there can be no guarantee that the Company will be able to extend or renew these agreements on similar terms, or at all. Substantially all of the Company's hardware products are manufactured by outsourcing partners that are located primarily in Asia