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Apple Inc. Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME See accompanying Notes to Consodated rinancal Statements. Apple Inc. RNERI In ATER A A ANPE EHEETE Apple Inc. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In millions, except per share amounts) CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the Company recognizes revenue based on the gross amount billed to customers. The Company considers multiple factors when determining whether it obtains control of third-party products, including evaluating if it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product. For third-party applications sold through the App Store and certain digital content sold through the Company's other digital content stores, the Company does not obtain control of the product before transferring it to the customer. Therefore, the Company accounts for such sales on a net basis by recognizing in Services net sales only the commission it retains. The Company records revenue net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded within other current liabilities until remitted to the relevant government authority. Share-Based Compensation The Company generally measures share-based compensation based on the closing price of the Company's common stock on the date of grant, and recognizes expense on a straight-line basis for its estimate of equity awards that will ultimately vest. Further information regarding share-based compensation can be found in Note 9 , "Benefit Plans." Earnings Per Share The following table shows the computation of basic and diluted earnings per share for 2022 , 2021 and 2020 (net income in millions and shares in thousands): The Company applies the treasury stock method to determine the dilutive effect of potentially dilutive securities. Cash Equivalents and Marketable Securities All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents. The Company's investments in marketable debt securities have been classified and accounted for as available-for-sale. The Company classifies its marketable debt securities as either short-term or long-term based on each instrument's underlying contractual maturity date. The Company's investments in marketable equity securities are classified based on the nature of the securities and their availability for use in current operations. The cost of securities sold is determined using the specific identification method. Inventories Inventories are measured using the first-in, first-out method. Restricted Marketable Securities The Company considers marketable securities to be restricted when withdrawal or general use is legally restricted. The Company reports restricted marketable securities as current or non-current marketable securities in the Consolidated Balance Sheets based on the classification of the underlying securities. Property, Plant and Equipment Depreciation on property, plant and equipment is recognized on a straight-line basis over the estimated useful lives of the assets, which for buildings is the shorter of 40 years or the remaining life of the building; between one and five years for machinery and equipment, including manufacturing equipment; and the shorter of the lease term or useful life for leasehold improvements. Capitalized costs related to internal-use software are amortized on a straight-line basis over the estimated useful lives of the assets, which range from five to seven years. Depreciation and amortization expense on property, plant and equipment was $8.7 billion, $9.5 billion and $9.7 billion during 2022,2021 and 2020 , respectively. Derivative Instruments and Hedging All derivative instruments are recorded in the Consolidated Balance Sheets at fair value. The accounting treatment for derivative gains and losses is based on intended use and hedge designation. Gains and losses arising from amounts that are included in the assessment of cash flow hedge effectiveness are initially deferred in accumulated other comprehensive income/(loss) ("AOCl") and subsequently reclassified into eamings when the hedged transaction affects eamings, and in the same line item in the Consolidated Statements of Operations. For options designated as cash flow hedges, the Company excludes time value from the assessment of hedge effectiveness and recognizes it on a straight-line basis over the life of the hedge in the Consolidated Statements of Operations line item to which the hedge relates. Changes in the fair value of amounts excluded from the assessment of hedge effectiveness are recognized in other comprehensive income/(loss) (OClCl). Gains and losses arising from amounts that are included in the assessment of fair value hedge effectiveness are recognized in the Consolidated Statements of Operations line item to which the hedge relates along with offsetting losses and gains related to the change in value of the hedged item. For foreign exchange forward contracts designated as fair value hedges, the Company excludes the forward carry component from the assessment of hedge effectiveness and recognizes it in other income/(expense), net ("OI\&E") on a straight-line basis over the life of the hedge. Changes in the fair value of amounts excluded from the assessment of hedge effectiveness are recognized in OCl. Gains and losses arising from changes in the fair values of derivative instruments that are not designated as accounting hedges are recognized in the Consolidated Statements of Operations line items to which the derivative instruments relate. The Company presents derivative assets and liabilities at their gross fair values in the Consolidated Balance Sheets. The Company classifies cash flows related to derivative instruments as operating activities in the Consolidated Statements of Cash Flows. Fair Value Measurements The fair values of the Company's money market funds and certain marketable equity securities are based on quoted prices in active markets for identical assets. The valuation techniques used to measure the fair value of the Company's debt instruments and all other financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data. Income Taxes The Company records certain deferred tax assets and liabilities in connection with the minimum tax on certain foreign earnings created by the U.S. Tax Cuts and Jobs Act of 2017 (the "Act"). Leases The Company combines and accounts for lease and nonlease components as a single lease component for leases of corporate, data center and retail facilities. The discount rates related to the Company's lease liabilities are generally based on estimates of the Company's incremental borrowing rate, as the discount rates implicit in the Company's leases cannot be readily determined. Note 4 - Consolidated Financial Statement Details The following tables show the Company's consolidated financial statement details as of September 24, 2022 and September 25, 2021 (in millions): Other Income/(Expense), Net The following table shows the detail of O1\&E for 2022, 2021 and 2020 (in millions): Note 5 - Income Taxes Provision for Income Taxes and Effective Tax Rate The provision for income taxes for 2022, 2021 and 2020, consisted of the following (in millions): The foreign provision for income taxes is based on foreign pretax earnings of $71.3 billion, $68.7 billion and $38.1 billion in 2022 , 2021 and 2020, respectively. Over the last three reporting periods, the amount that Apple's total net sales has exceeded total cost of sales has a. increased b. decreased c. stayed the same d. cannot be determined QUESTION 2 Does Apple disclose its estimate of uncollectible accounts receivable on its balance sheet? a. Yes b. No QUESTION 3 Use the following formula to calculate Apple's accounts receivable turnover ratio at the last two balance sheet dates: Account receivable turnover ratio = Total net sales / Accounts receivable, net (Round answer to two decimal places.) Select the correct answer below. a. The company collected accounts receivable faster in the most recent reporting period than the prior reporting period. b. The company collected accounts receivable slower in the most recent reporting period than the prior reporting period. c. The company collected accounts receivable at the same rate as in the prior reporting period. QUESTION 4 At the most recent balance sheet date, the historical cost of the company's property, plant and equipment was (in millions): a. $22,126. b. $114,457. c. $72,340. d. $217,350. At the most recent balance sheet date, the book value of Apple's property, plant and equipment was (in millions): a. $42,117. b. $72,340. c. $114,457. d. $22,126. QUESTION 6 At the most recent balance sheet date, total depreciation and amortization expense recognized by Apple on property, plant and equipment since the assets were acquired was (in millions): a. $9,500. b. $114,457. c. $42,117. d. $72,340. QUESTION 7 As a proportion of total assets, Apple's property, plant and equipment (net) over the last two reporting periods has (round to nearest whole percent): a. increased b. decreased c. stayed the same d. cannot be determined QUESTION 8 Apple's depreciation method results in book value being reported on the company's balance sheet early in an asset's useful life than compared to the accelerated depreciation methods. a. more b. less c. the same Apple's depreciation method results in net income being reported on the company's income statement early in an asset's useful life than compared to the accelerated depreciation methods. a. the same b. less c. more QUESTION 10 In the most recent reporting period, the amount of cash paid by Apple for property, plant and equipment was (in millions)? a. $10,708. b. $306. c. $2,677. d. $22,354 QUESTION 11 a. used its assets more efficiently to generate earnings. b. used its assets less efficiently to generate earnings. c. used its assets as efficiently to generate earnings. d. none of the above. QUESTION 12 Apple increased which account when it originally issued shares of its stock for cash? a. Retained earnings b. Shareholders' equity c. Common stock d. Revenues At the most recent balance sheet date, Apple's shareholder claims to the company's assets totaled (in millions) : a. $3,068. b. $64,849. c. $50,672. d. $352,755. QUESTION 14 At the most recent balance sheet date, Apple's paid-in capital totaled: a. $50,672. b. $64,849. c. $352,755. d. $3,068. QUESTION 15 Apple's undistributed earnings at the most recent balance sheet date was (in millions): a. $352,755. b. $(3,068). c. $50,672. d. $23,646. QUESTION 16 The amount of dividends declared by Apple during the most recent reporting period was $14,793. True False Did Apple pay cash to repurchase any of its common stock shares during the most recent reporting period? a. Yes b. No QUESTION 18 Which of Apple's financial statements is not accrual-based? a. Income statement b. Balance sheet c. Statement of shareholders' equity d. Statement of cash flows QUESTION 19 For the most recent reporting period, Apple's largest source of cash was from: a. Investing activities b. Operating activities c. Financing activities QUESTION 20 Apple's cash-based net income for the most recent reporting period was (in millions): a. $122,151. b. $99,803. c. $23,646. d. $394,328. Apple Inc. Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME See accompanying Notes to Consodated rinancal Statements. Apple Inc. RNERI In ATER A A ANPE EHEETE Apple Inc. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In millions, except per share amounts) CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the Company recognizes revenue based on the gross amount billed to customers. The Company considers multiple factors when determining whether it obtains control of third-party products, including evaluating if it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product. For third-party applications sold through the App Store and certain digital content sold through the Company's other digital content stores, the Company does not obtain control of the product before transferring it to the customer. Therefore, the Company accounts for such sales on a net basis by recognizing in Services net sales only the commission it retains. The Company records revenue net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded within other current liabilities until remitted to the relevant government authority. Share-Based Compensation The Company generally measures share-based compensation based on the closing price of the Company's common stock on the date of grant, and recognizes expense on a straight-line basis for its estimate of equity awards that will ultimately vest. Further information regarding share-based compensation can be found in Note 9 , "Benefit Plans." Earnings Per Share The following table shows the computation of basic and diluted earnings per share for 2022 , 2021 and 2020 (net income in millions and shares in thousands): The Company applies the treasury stock method to determine the dilutive effect of potentially dilutive securities. Cash Equivalents and Marketable Securities All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents. The Company's investments in marketable debt securities have been classified and accounted for as available-for-sale. The Company classifies its marketable debt securities as either short-term or long-term based on each instrument's underlying contractual maturity date. The Company's investments in marketable equity securities are classified based on the nature of the securities and their availability for use in current operations. The cost of securities sold is determined using the specific identification method. Inventories Inventories are measured using the first-in, first-out method. Restricted Marketable Securities The Company considers marketable securities to be restricted when withdrawal or general use is legally restricted. The Company reports restricted marketable securities as current or non-current marketable securities in the Consolidated Balance Sheets based on the classification of the underlying securities. Property, Plant and Equipment Depreciation on property, plant and equipment is recognized on a straight-line basis over the estimated useful lives of the assets, which for buildings is the shorter of 40 years or the remaining life of the building; between one and five years for machinery and equipment, including manufacturing equipment; and the shorter of the lease term or useful life for leasehold improvements. Capitalized costs related to internal-use software are amortized on a straight-line basis over the estimated useful lives of the assets, which range from five to seven years. Depreciation and amortization expense on property, plant and equipment was $8.7 billion, $9.5 billion and $9.7 billion during 2022,2021 and 2020 , respectively. Derivative Instruments and Hedging All derivative instruments are recorded in the Consolidated Balance Sheets at fair value. The accounting treatment for derivative gains and losses is based on intended use and hedge designation. Gains and losses arising from amounts that are included in the assessment of cash flow hedge effectiveness are initially deferred in accumulated other comprehensive income/(loss) ("AOCl") and subsequently reclassified into eamings when the hedged transaction affects eamings, and in the same line item in the Consolidated Statements of Operations. For options designated as cash flow hedges, the Company excludes time value from the assessment of hedge effectiveness and recognizes it on a straight-line basis over the life of the hedge in the Consolidated Statements of Operations line item to which the hedge relates. Changes in the fair value of amounts excluded from the assessment of hedge effectiveness are recognized in other comprehensive income/(loss) (OClCl). Gains and losses arising from amounts that are included in the assessment of fair value hedge effectiveness are recognized in the Consolidated Statements of Operations line item to which the hedge relates along with offsetting losses and gains related to the change in value of the hedged item. For foreign exchange forward contracts designated as fair value hedges, the Company excludes the forward carry component from the assessment of hedge effectiveness and recognizes it in other income/(expense), net ("OI\&E") on a straight-line basis over the life of the hedge. Changes in the fair value of amounts excluded from the assessment of hedge effectiveness are recognized in OCl. Gains and losses arising from changes in the fair values of derivative instruments that are not designated as accounting hedges are recognized in the Consolidated Statements of Operations line items to which the derivative instruments relate. The Company presents derivative assets and liabilities at their gross fair values in the Consolidated Balance Sheets. The Company classifies cash flows related to derivative instruments as operating activities in the Consolidated Statements of Cash Flows. Fair Value Measurements The fair values of the Company's money market funds and certain marketable equity securities are based on quoted prices in active markets for identical assets. The valuation techniques used to measure the fair value of the Company's debt instruments and all other financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data. Income Taxes The Company records certain deferred tax assets and liabilities in connection with the minimum tax on certain foreign earnings created by the U.S. Tax Cuts and Jobs Act of 2017 (the "Act"). Leases The Company combines and accounts for lease and nonlease components as a single lease component for leases of corporate, data center and retail facilities. The discount rates related to the Company's lease liabilities are generally based on estimates of the Company's incremental borrowing rate, as the discount rates implicit in the Company's leases cannot be readily determined. Note 4 - Consolidated Financial Statement Details The following tables show the Company's consolidated financial statement details as of September 24, 2022 and September 25, 2021 (in millions): Other Income/(Expense), Net The following table shows the detail of O1\&E for 2022, 2021 and 2020 (in millions): Note 5 - Income Taxes Provision for Income Taxes and Effective Tax Rate The provision for income taxes for 2022, 2021 and 2020, consisted of the following (in millions): The foreign provision for income taxes is based on foreign pretax earnings of $71.3 billion, $68.7 billion and $38.1 billion in 2022 , 2021 and 2020, respectively. Over the last three reporting periods, the amount that Apple's total net sales has exceeded total cost of sales has a. increased b. decreased c. stayed the same d. cannot be determined QUESTION 2 Does Apple disclose its estimate of uncollectible accounts receivable on its balance sheet? a. Yes b. No QUESTION 3 Use the following formula to calculate Apple's accounts receivable turnover ratio at the last two balance sheet dates: Account receivable turnover ratio = Total net sales / Accounts receivable, net (Round answer to two decimal places.) Select the correct answer below. a. The company collected accounts receivable faster in the most recent reporting period than the prior reporting period. b. The company collected accounts receivable slower in the most recent reporting period than the prior reporting period. c. The company collected accounts receivable at the same rate as in the prior reporting period. QUESTION 4 At the most recent balance sheet date, the historical cost of the company's property, plant and equipment was (in millions): a. $22,126. b. $114,457. c. $72,340. d. $217,350. At the most recent balance sheet date, the book value of Apple's property, plant and equipment was (in millions): a. $42,117. b. $72,340. c. $114,457. d. $22,126. QUESTION 6 At the most recent balance sheet date, total depreciation and amortization expense recognized by Apple on property, plant and equipment since the assets were acquired was (in millions): a. $9,500. b. $114,457. c. $42,117. d. $72,340. QUESTION 7 As a proportion of total assets, Apple's property, plant and equipment (net) over the last two reporting periods has (round to nearest whole percent): a. increased b. decreased c. stayed the same d. cannot be determined QUESTION 8 Apple's depreciation method results in book value being reported on the company's balance sheet early in an asset's useful life than compared to the accelerated depreciation methods. a. more b. less c. the same Apple's depreciation method results in net income being reported on the company's income statement early in an asset's useful life than compared to the accelerated depreciation methods. a. the same b. less c. more QUESTION 10 In the most recent reporting period, the amount of cash paid by Apple for property, plant and equipment was (in millions)? a. $10,708. b. $306. c. $2,677. d. $22,354 QUESTION 11 a. used its assets more efficiently to generate earnings. b. used its assets less efficiently to generate earnings. c. used its assets as efficiently to generate earnings. d. none of the above. QUESTION 12 Apple increased which account when it originally issued shares of its stock for cash? a. Retained earnings b. Shareholders' equity c. Common stock d. Revenues At the most recent balance sheet date, Apple's shareholder claims to the company's assets totaled (in millions) : a. $3,068. b. $64,849. c. $50,672. d. $352,755. QUESTION 14 At the most recent balance sheet date, Apple's paid-in capital totaled: a. $50,672. b. $64,849. c. $352,755. d. $3,068. QUESTION 15 Apple's undistributed earnings at the most recent balance sheet date was (in millions): a. $352,755. b. $(3,068). c. $50,672. d. $23,646. QUESTION 16 The amount of dividends declared by Apple during the most recent reporting period was $14,793. True False Did Apple pay cash to repurchase any of its common stock shares during the most recent reporting period? a. Yes b. No QUESTION 18 Which of Apple's financial statements is not accrual-based? a. Income statement b. Balance sheet c. Statement of shareholders' equity d. Statement of cash flows QUESTION 19 For the most recent reporting period, Apple's largest source of cash was from: a. Investing activities b. Operating activities c. Financing activities QUESTION 20 Apple's cash-based net income for the most recent reporting period was (in millions): a. $122,151. b. $99,803. c. $23,646. d. $394,328