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Question 2 At the most recent balance sheet date. Amazon's estimate of uncollectible accounts receivable was (in millions) a. $13.512. b, $13.164. c. $12.186. c d.$348. Question4 At the most recent balance sheet date, the historical cost of the company's property and equipment was (in millions): C a. $48.866. b.$19.707. c$68,573. d. $88.280. Question 5 At the most recent balance sheet date, the book value of Amazon's property and equipment was (in millions) a. $19,707. b, $68.573. Cc.$88.280 o d. $48.866 Question 6 At the most recent balance sheet date, total depreciation expense recognized by Amazon's on property and equipment since the assets were acquired was (in millions): G a.$19,707. b.$48.866 c. $68.573. d.$88.280. Question 7 Amazon's current year's depreciation expense was: a. $ 19,707 (in millions) c b. $13,327 (in millions) c, $8.8 billion o d.$6.4 billion Question 10 In the most recent reporting period, the amount of cash paid by Amazon paid for property and equipment was (in millions? a. $19,752 b. $11,955 . $19,707 d. $6,380 CONSOLIDATED STATEMENTS OF CASH FLOws (in millions) Year Ended December 31 2016 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD OPERATING ACTIVITIES Net income Adjustments to reconcile net income to net cash from operating activities S 14557 S15,890S19,334 2,371 3,033 ion of property and equipment, development, and other amortization, internal-use software and capitalized content costs 11.478 4215 202 (292) (29) 6.281 2,119 8,116 Stock-based compensation Other operating expense, net Other expense (income), net Deferred income taxes 2,975 (20) (246) 250 Changes in operating assets and liabilities: Inventories Accounts receivable, net and other Accounts payable Accrued expenses and other Unearned revenue (1,426) (3,367) 5,030 (3,583) (4,786) 7,175 283 (1,755) 1,724 1.292 1,955 17,272 Net cash provided by (used in) operating activities 18,434 NVESTING ACTIVITIES Purchases of property and equipment, including internal-use software and website 7,804) development Procceds from property and equipment incentives Acquisitions, net of cash acquired, and other Sales and maturities of marketable securities Purchases of marketable securities (116) 4,733 (7,756) 9,876) (11,955) 1,897 (13,972) 9,988 (13,777) (27,819) (795) (4,091) (6,450) Net cash provided by (used in) investing activities FINANCING ACTIVITIES Proceeds from long-term debt and other Repayments of long-term debt and other Principal repayments of capital lease obligations Principal repayments of finance lease obligations 353 (1,652) (2.462) (121) (3,882) (374) 16231 1,372) 4,799) (354) (147) (3,740) Net cash provided by (used in) financing activities 9,860 Foreign currency effect on cash and cash equivalents Net increase (decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS, END OF PERIOD SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest on long-term debt Cash paid for interest on capital and finance lease obligations Cash paid for income taxes, net of refunds Property and equipment acquired under capital leases Property and equipment acquired under build-to-suit leases 3.444 19,334 S 1,188 20,522 15,890 325 S 153 290 S 328 412 4,717 5,704 9,637 3,541 See accompanying notes to consolidated financial statements CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) Year Ended December 31, 2016 2015 2017 Net product sales Net service sales 27,738 107,006 S 79,268 94,665 S 118,573 59,293 177,866 41,322 135,987 Total net sales Operating expenses: Cost of sales Fulfillment Marketing Technology and content General and administrative Other operating expense, net 71,651 13,410 5,254 12,540 1,747 88,265 17,619 7,233 16,085 2,432 111,934 25,249 10,069 22,620 3,674 167 104,7731380U 4,186 173,760 4,106 202 (848) 346 (300) 3,806 Total operating expenses 2,233 50 (459) (256) (665) 1,568 (950) (22) Operating income Interest income Interest expense Other income (expense), net 100 (484) 90 (294) Total non-operating income (expense) 3,892 (1,425) Income before income taxes Provision for income taxes Equity-method investment activity, net of tax Net income Basic earnings per share Diluted earnings per share Weighted-average shares used in computation of earnings per share: (769) (96) 2,371 S 5.01 S 4.90 S 596 $ 3,033 6.15 467 474 Basic Diluted 480 493 477 484 See accompanying notes to consolidated financial statements CONSOLIDATED BALANCE SHEETS (in millions, except per share data) December 31. 2016 2017 ASSETS Current assets: S 19,334 S 20,522 10,464 16,047 13,164 60,197 48,866 13,350 8,897 83,402 $ 131,310 Cash and cash equivalents Marketable securities Inventories 6,647 11,461 8,339 45,781 29,114 3,784 Accounts recivable, net and other Total current assets Property and equipment, net Goodwill Other assets Total assets LIABILITIES AND STOCKHOLDERS" EQUITY Current liabilities: s 25,309 S 34,616 18,170 5,097 57,883 24,743 20,975 Accounts payable Accrued expenses and other Unearned revenue 13,739 4,768 43,816 7,694 12,607 Total current liabilities Long-term debt Other long-term liabilities Commitments and contingencies (Note 7) Stockholders' equity Preferred stock, $0.01 par value Authorized shares-500 Issued and outstanding shares-none Common stock, S0.01 par value: Authorized shares-5,000 Issued shares -500 and 507 Outstanding shares- 477 and 484 Treasury stock, at cost Additional paid-in capital Retained earnings (1,837) 17,186 (985) 4916 19,285 (1,837) 21,389 (484) 8,636 27.709 S 83,402 131,310 ensive loss Total stockholders' equity Total liabilities and stockholders' equity See accompanying notes to consolidated financial statements CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in millions) Common Stock Other Total Treasury Stock Paid-In Comprehensive Retained Stockholders Amount Capital CapitalcmLoss Earning Equity Balance as of January 1, 2015 Net income Other comprehensive income (loss) Exercise of common stock options Excess tax benefits from stock-based 465 S 5S (1,837) S11,135 (511) S 1,949 S 10,741 596 (212) 596 (212) 119 2,131 471 5 (1,837) 13,394 119 Stock-based compensation and issuance of employee benefit plan stock 2,131 Issuance of common stock for acquisition activity Balance as of December 31, 2015 Net income Other comprehensive income (loss) Exercise of common stock options (1,837) 13,394 (723) 2,4513,384 2,37 2,371 (262) (262) Excess tax benefits from stock-based compensation 829 829 Stock-based compensation and issuance of employee benefit plan stock 2,962 5 (1,837) 17,186 2,962 19,285 Balance as of December 31, 2016 477 (985) 4,916 Cumulative effect of a change in accounting principle related to stock-based compensation Net income 687 687 3,033 3,033 501 Other comprehensive income Exercise of common stock options 501 Stock-based compensation and issuance of employee benefit plan stock 4,202 4,202 (484) S 8,636 S 27,709 Balance as of December 31,2017 484 S See accompanying notes to consolidated financial statements Cash and Cash Equivalents We classify all highly liquid instruments with an original maturity of three months or less as cash equivalents Inventories Inventories, consisting of products available for sale, are primarily accounted for using the first-in, first-out method, and are valued at the lower of cost and net realizable value. This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category We provide Fulfillment by Amazon services in connection with certain of our sellers' programs. Third-party sellers maintain ownership of their inventory, regardless of whether fulfillment is provided by us or the third-party sellers, and therefore these products are not included in our inventories We also purchase electronic device components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate supply, we enter into agreements with contract manufacturers and suppliers for certain electronic device components. A portion of our reported purchase commitments arising from these agreements consists of firm, non-cancellable commitments. These commitments are based on forecasted customer demand. If we reduce these commitments, we may incur additional costs. We also have firm, non-cancellable commitments for certain products offered in our Whole Foods Market stores. Accounts Receivable, Net and Other Included in "Accounts receivable, net and other" on our consolidated balance sheets are amounts primarily related to customers, sellers, and vendors. As of December 31, 2016 and 2017, customer receivables, net, were $3.9 billion and $6.4 billion, seller receivables, net, were $661 million and S692 million, and vendor receivables, net, were $2.0 billion and $2.6 billion. Seller receivables are amounts due from sellers related to our seller lending program, which provides funding to sellers primarily to procure inventory We estimate losses on receivables based on known troubled accounts and historical experience of losses incurred. Receivables are considered impaired and written-off when it is probable that all contractual payments due will not be collected accordance with the terms of the agreement. The allowance for doubtful accounts was $189 million, $237 million, and $348 million as of December 31, 2015, 2016, and 2017. Additions to the allowance were $289 million, $451 million, and $626 million, and deductions to the allowance were $290 million, $403 million, and $S1S million in 2015, 2016, and 2017. The allowance for loan losses related to our seller receivables was not material as of December 31, 2016 and 2017 Internal-Use Software and Website Development Costs incurred to develop software for internal use and our websites are capitalized and amortized over the estimated useful life of the software. Costs related to design or maintenance of internal-use software and website development are expensed as incurred. For the years ended 2015, 2016, and 2017, we capitalized $642 million (including $114 million of stock- based compensation), $511 million (including $94 million of stock-based compensation), and $395 million (including $84 million of stock-based compensation) of costs associated with internal-use software and website development. Amortization of previously capitalized amounts was $635 million, S634 million, and $545 million for 2015, 2016, and 2017 million for Property and Equipment, Net Property and equipment are stated at cost less accumulated depreciation. Incentives that we receive from property and equipment vendors are recorded as a reduction in our costs. Property includes buildings and land that we own, along with 46 property we have acquired under build-to-suit, finance, and capital lease arrangements. Equipment includes assets such as furniture and fixtures, heavy equipment, servers and networking equipment, and internal-use software and website development. Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets (generally the lesser of 40 years or the remaining life of the underlying building, two years for assets such as internal-use software, three years for our servers, five years for networking equipment, five years for furniture and fixtures, and ten years for heavy equipment). Depreciation expense is classified within the corresponding operating expense categories on our consolidated statements of operations Leases and Asset Retirement Obligations We categorize leases at their inception as either operating or capital leases. On certain of our lease agreements, we may receive rent holidays and other incentives. We recognize lease costs on a straight-line basis without regard to deferred payment terms, such as rent holidays, that defer the commencement date of required payments. Additionally, incentives we receive are treated as a reduction of our costs over the term of the agreement. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the non-cancellable term of the lease We establish assets and liabilities for the estimated construction costs incurred under build-to-suit lease arrangements to the extent we are involved in the construction of structural improvements or take construction risk prior to commencement of a lease. Upon occupancy of facilities under build-to-suit leases, we assess whether these arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If we continue to be the deemed owner, the facilities are accounted for as finance leases We establish assets and liabilities for the present value of estimated future costs to retire long-lived assets at the termination or expiration of a lease. Such assets are depreciated over the lease period into operating expense, and the recorded liabilities are accreted to the future value of the estimated retirement costs Goodwill We evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. In testing goodwill for impairment, we may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform a two-step impairment test. We test goodwill for impairment under the two-step impairment test by first comparing the book value of net assets to the fair value of the reporting units, If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. We estimate the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions We completed the required annual testing of goodwill for impairment for all reporting units as of April I, 2017, and determined that goodwill is not impaired as the fair value of our reporting units substantially exceeded their book value. There were no triggering events identified from the date of our assessment through December 31, 2017 that would require an update to our annual impairment test. See "Note 4-Acquisitions, Goodwill, and Acquired Intangible Assets Other Assets Included in "Other assets" on our consolidated balance sheets are amounts primarily related to acquired intangible assets, net of amortization; video and music content, net of amortization; long-term deferred tax assets; certain equity investments: marketable securities restricted for longer than one year, the majority of which are attributable to collateralization of bank guarantees and debt related to our international operations; and equity warrant assets. Video and Music Content We obtain video and music content for customers through licensing agreements that have a wide range of licensing provisions, which include both fixed and variable payment schedules. When the license fee for a specific movie, television, or music title is determinable or reasonably estimable and the content is available for streaming, we recognize an asset representing the fee and a corresponding liability for the amounts owed We relieve the liability as payments are made and we amortize the asset to "Cost of sales" on a straight-line basis or on an accelerated basis, based on estimated usage patterns, which typically ranges from one to five years. If we are unable to reasonably estimate the cost per title, no asset or liability is recorded and licensing costs are expensed as incurred. We also develop original content Capitalized production costs associated with our original content are limited by the amount of revenue we expect to earn, which results in a portion being 47 expensed as incurred. These capitalized costs are amortized to "Cost of sales" on an accelerated basis that follows the viewing pattern of customer streams in the first months after availability

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