Question 9
In the first year of useful life for Applied Materials' plant and equipment:
| | a. | net income would be higher on the company's income statement with the depreciation method used by Applied Materials compared to double-declining balance depreciation method. |
| | b. | book value would be the same amount on the company's balance sheet with the depreciation method used by Applied Materials compared to double-declining balance depreciation method. |
| | c. | net income would be lower on the company's income statement with the depreciation method used by Applied Materials compared to double-declining balance depreciation method. |
| | d. | book value would be lower on the company's balance sheet with the depreciation method used by Applied Materials compared to double-declining balance depreciation method. |
APPLIED MATERIALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Balance Sheet Detall Note 7 October 28 October 29, (I willons) 595 Inventories Customer service spares Raw materials. Work-in-process Finished goods 989 $ 1.020 505 1.208 3,722 $ 1,264 2,930 Included in finished goods inventory is $19 million at October 28, 2018 and $331 million at October 29, 2017. of newly introduced systems at customer locations where the sales transaction did not meet Applied's revenue recognition criteria as set forth in Note 1. Finished goods inventory includes $350 million and $281 million of evaluation inventory at October 28, 2018 and October 29, 2017, respectively, October 28 October 29, Other Current Assets Prepaid income taxes and income taxes receivable Prepaid expenses and other | Cober 201N | | 2017 | 245 1282 Property. Plant and Equipment, Net Land and improvements Buildings and improvements Demonstration and manufacturing equipment Furniture, fixtures and other equipment Construction in progress Gross property, plant and equipment Accumulated depreciation 634 203 OS) 25 -4b3c-bdb3-4d0f x + ad9bee5-4cd7-4b3c-bdb3-4d0f987852b7 APPLIED MATERIALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Property Plantand o Property, plant and equipment is stated at cost. Depreciation is provided over the estimated useful lives of the acts using the straight-line method Estimated lives for financial reporting purpose we as follows building and improvements to 30 year demonstration and manufacturing equipment, to 5 yearsoftware, 3 to 5 years, and furniture, fixtures daher equipment, 3 to 5 years. Land improvements are morired over the shorter of 15 years or the estimated life Leasehold improvements are amortired over the shorter of five years or the lease term Intangible Assets Goodwill and indefinite-lived assets are not amortized, but are reviewed for impairment annually during the fourth quarter of cach fiscal year and whenever events or changes in circumstances indicate that the carrying value of n e may not be recoverable. Purchased technology and other intangible assets are presented al cost, net of accumulated amortization, and we amortized over their estimated useful lives of Ito 15 years using the straight-line method Long-Lied Assets Applied reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these sets or asset group may not be recoverable. Applied assesses these assets for impairment based on estimated future cash flows from these assets Research, Development and Engineering Costs Research, development and engineering costs are expensed as incurred Sales and Tue Added Taxes Taxes collected from customers and remitted to governmental authorities are presented on a net basis in the accompanying Consolidated Statements of Operations Bay Applied provides for the estimated cost of warranty when revenue is recognized Estimated warranty costs are determined by analyzing specific product, current and historical configuration statistics and regional warranty support costs. Applied's warranty obligation is affected by product and component failure rates, material usage and labor costs incurred incorrecting productilures during the warranty period factual warranty costs differ substantially from Applied estimates revisions to the estimated warranty liability would be required Income Tanes Applied recognizes acu t i lity for the estimated amount of income tax payable on tax returns for the current fiscal year Deferred tax assets and liabilities are recognized for the estimated future tax effects of temporary differences between the book and tax bases of acts and liabilities Deferred tax assets are also recognized for at operating loss and tax credit carryover omed tax acts are offset by a valuation allance to the extent it is more likely than not that they are not expected to D Applied reg benefit from an y of its more likely than not that the position will be und the authentic based on the chalmers of the The tan d from such position there one that has al s o the real uchendance s c olod for come mesin the quarter which such change occurs Interest and realised to uncertaint s are applied s APPLIED MATERIALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS da Fheal You 2017 3,434 S 3,313 $ 1,721 101 389 21 201 (226) (37) (542) Cash flows from operating activities: Net income Adjustments required to reconcile net income to cash provided by operati Depreciation and amortization .. Deferred income taxes..... Other ............. Share-based compensation .. Changes in operating assets and liabilities, net of amounts acquirt Accounts receivable...... Inventories Other current and non-current assets Accounts payable and acerued expenses Customer deposits and deferred revenue Income taxes payable........ Other liabilities ....... Cash provided by operating activities... Cash flows from investing activities: Capital expenditures... . Cash paid for acquisitions, net of cash acquired Proceeds from sales and maturities of investments Purchases of investments Cash provided by (used in) investing activities... Cash flows from financing activities Debt borrowings, net of issuance costs Debt repayments . Proceeds from common stock issuances Common stock repurchases... Tax withholding payments for vested equity awards Payments of dividends to stockholders Cash provided by (used in) financing activities Increase (decrease in cash and cash equivalents Cash and cash equivalents -- beginning of year Cash and cash equivalents --- end of year Supplemental cash flow information Cash payments for income taxes Cash refunds from income taxes Cash payments for interest (6) 3.276 2.526) 2.176 (205) (1 2071 (1172) (1.892 (16 ) (77) (605) 444) 15.928) (1.570) (3.532) (1391) 4,797 SO10 3:440 S 5010S 3,406 300 63 219 $ S S 194 6 186 $ S S 157 113. 151 Saan Noul Sus APPLIED MATERIALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) Fiscal Year 17,253 10.825 9.436 14,537 8,005 6,532 7,817 2,019 774 540 2,664 3,868 198 Net sales Cost of products sold Gross profit...... Operating expenses..... Research, development and engineering Marketing and selling General and administrative Total operating expenses Income from operations Interest expenser Interest and other income, net Income before income taxes Provision for income taxes Net income Earnings per share: Basic Diluted Weighted average number of shares Basic Diluted 61 3.731 297 3,434 3,313 S S 1,721 3.27 $ 3.23 $ 3.20 3.17 S 1,013 1026 1,073 1.084 APPLIED MATERIALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) Fiscal Year 17,253 10.825 9.436 14,537 8,005 6,532 7,817 2,019 774 540 2,664 3,868 198 Net sales Cost of products sold Gross profit...... Operating expenses..... Research, development and engineering Marketing and selling General and administrative Total operating expenses Income from operations Interest expenser Interest and other income, net Income before income taxes Provision for income taxes Net income Earnings per share: Basic Diluted Weighted average number of shares Basic Diluted 61 3.731 297 3,434 3,313 S S 1,721 3.27 $ 3.23 $ 3.20 3.17 S 1,013 1026 1,073 1.084 APPLIED MATERIALS, INC. CONSOLIDATED RALANCE SHEETS ( ) October 28 October ASSETS 3,440 $ 590 5,010 2,266 2,338 2,930 374 Current assets: ..... Cash and cash equivalents Short-term investments. Accounts receivable, net........ Inventories....... Other current assets ....... Total current assets .......... Long-term investments ........... Property, plant and equipment, net .... Goodwill ....... Purchased technology and other intangible assets, net. Deferred income taxes and other assets.... Total assets ....... 2,565 3,722 430 10,747 1,568 1,407 3,368 213 470 17,773 12,918 1,143 1,066 3,368 412 512 19,419 $ 2,721 S 4,068 5,309 1,254 2,450 1,665 4,115 5304 392 259 10,070 303 10,934 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses. Customer deposits and deferred revenue. Total current liabilities. Long-term debt...... Income taxes payable.... Other liabilities........ Total liabilities ... Commitments and contingencies (Note 14) Stockholders' equity Preferred stock: 8.01 par value per share; I shares authorized: no shares issued Common stock: 9.01 par value per share: 2.500 shares authorized: 967 and 1,060 shares outstanding at 2018 and 2017, respectively Additional paid in capital Retained camnings Treasury stock: 1,019 and 917 shares at 2018 and 2017 respectively Accumulated other comprehensive loss Total stockholders' equity Total liabilities and stockholders' equity 7.274 20,874 (21,194) (125) 6,839 17.773 $ 7056 18,258 (15,912) (64) 9349 19,419 S APPLIED MATERIALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Balance Sheet Detall Note 7 October 28 October 29, (I willons) 595 Inventories Customer service spares Raw materials. Work-in-process Finished goods 989 $ 1.020 505 1.208 3,722 $ 1,264 2,930 Included in finished goods inventory is $19 million at October 28, 2018 and $331 million at October 29, 2017. of newly introduced systems at customer locations where the sales transaction did not meet Applied's revenue recognition criteria as set forth in Note 1. Finished goods inventory includes $350 million and $281 million of evaluation inventory at October 28, 2018 and October 29, 2017, respectively, October 28 October 29, Other Current Assets Prepaid income taxes and income taxes receivable Prepaid expenses and other | Cober 201N | | 2017 | 245 1282 Property. Plant and Equipment, Net Land and improvements Buildings and improvements Demonstration and manufacturing equipment Furniture, fixtures and other equipment Construction in progress Gross property, plant and equipment Accumulated depreciation 634 203 OS) 25 -4b3c-bdb3-4d0f x + ad9bee5-4cd7-4b3c-bdb3-4d0f987852b7 APPLIED MATERIALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Property Plantand o Property, plant and equipment is stated at cost. Depreciation is provided over the estimated useful lives of the acts using the straight-line method Estimated lives for financial reporting purpose we as follows building and improvements to 30 year demonstration and manufacturing equipment, to 5 yearsoftware, 3 to 5 years, and furniture, fixtures daher equipment, 3 to 5 years. Land improvements are morired over the shorter of 15 years or the estimated life Leasehold improvements are amortired over the shorter of five years or the lease term Intangible Assets Goodwill and indefinite-lived assets are not amortized, but are reviewed for impairment annually during the fourth quarter of cach fiscal year and whenever events or changes in circumstances indicate that the carrying value of n e may not be recoverable. Purchased technology and other intangible assets are presented al cost, net of accumulated amortization, and we amortized over their estimated useful lives of Ito 15 years using the straight-line method Long-Lied Assets Applied reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these sets or asset group may not be recoverable. Applied assesses these assets for impairment based on estimated future cash flows from these assets Research, Development and Engineering Costs Research, development and engineering costs are expensed as incurred Sales and Tue Added Taxes Taxes collected from customers and remitted to governmental authorities are presented on a net basis in the accompanying Consolidated Statements of Operations Bay Applied provides for the estimated cost of warranty when revenue is recognized Estimated warranty costs are determined by analyzing specific product, current and historical configuration statistics and regional warranty support costs. Applied's warranty obligation is affected by product and component failure rates, material usage and labor costs incurred incorrecting productilures during the warranty period factual warranty costs differ substantially from Applied estimates revisions to the estimated warranty liability would be required Income Tanes Applied recognizes acu t i lity for the estimated amount of income tax payable on tax returns for the current fiscal year Deferred tax assets and liabilities are recognized for the estimated future tax effects of temporary differences between the book and tax bases of acts and liabilities Deferred tax assets are also recognized for at operating loss and tax credit carryover omed tax acts are offset by a valuation allance to the extent it is more likely than not that they are not expected to D Applied reg benefit from an y of its more likely than not that the position will be und the authentic based on the chalmers of the The tan d from such position there one that has al s o the real uchendance s c olod for come mesin the quarter which such change occurs Interest and realised to uncertaint s are applied s APPLIED MATERIALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS da Fheal You 2017 3,434 S 3,313 $ 1,721 101 389 21 201 (226) (37) (542) Cash flows from operating activities: Net income Adjustments required to reconcile net income to cash provided by operati Depreciation and amortization .. Deferred income taxes..... Other ............. Share-based compensation .. Changes in operating assets and liabilities, net of amounts acquirt Accounts receivable...... Inventories Other current and non-current assets Accounts payable and acerued expenses Customer deposits and deferred revenue Income taxes payable........ Other liabilities ....... Cash provided by operating activities... Cash flows from investing activities: Capital expenditures... . Cash paid for acquisitions, net of cash acquired Proceeds from sales and maturities of investments Purchases of investments Cash provided by (used in) investing activities... Cash flows from financing activities Debt borrowings, net of issuance costs Debt repayments . Proceeds from common stock issuances Common stock repurchases... Tax withholding payments for vested equity awards Payments of dividends to stockholders Cash provided by (used in) financing activities Increase (decrease in cash and cash equivalents Cash and cash equivalents -- beginning of year Cash and cash equivalents --- end of year Supplemental cash flow information Cash payments for income taxes Cash refunds from income taxes Cash payments for interest (6) 3.276 2.526) 2.176 (205) (1 2071 (1172) (1.892 (16 ) (77) (605) 444) 15.928) (1.570) (3.532) (1391) 4,797 SO10 3:440 S 5010S 3,406 300 63 219 $ S S 194 6 186 $ S S 157 113. 151 Saan Noul Sus APPLIED MATERIALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) Fiscal Year 17,253 10.825 9.436 14,537 8,005 6,532 7,817 2,019 774 540 2,664 3,868 198 Net sales Cost of products sold Gross profit...... Operating expenses..... Research, development and engineering Marketing and selling General and administrative Total operating expenses Income from operations Interest expenser Interest and other income, net Income before income taxes Provision for income taxes Net income Earnings per share: Basic Diluted Weighted average number of shares Basic Diluted 61 3.731 297 3,434 3,313 S S 1,721 3.27 $ 3.23 $ 3.20 3.17 S 1,013 1026 1,073 1.084 APPLIED MATERIALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) Fiscal Year 17,253 10.825 9.436 14,537 8,005 6,532 7,817 2,019 774 540 2,664 3,868 198 Net sales Cost of products sold Gross profit...... Operating expenses..... Research, development and engineering Marketing and selling General and administrative Total operating expenses Income from operations Interest expenser Interest and other income, net Income before income taxes Provision for income taxes Net income Earnings per share: Basic Diluted Weighted average number of shares Basic Diluted 61 3.731 297 3,434 3,313 S S 1,721 3.27 $ 3.23 $ 3.20 3.17 S 1,013 1026 1,073 1.084 APPLIED MATERIALS, INC. CONSOLIDATED RALANCE SHEETS ( ) October 28 October ASSETS 3,440 $ 590 5,010 2,266 2,338 2,930 374 Current assets: ..... Cash and cash equivalents Short-term investments. Accounts receivable, net........ Inventories....... Other current assets ....... Total current assets .......... Long-term investments ........... Property, plant and equipment, net .... Goodwill ....... Purchased technology and other intangible assets, net. Deferred income taxes and other assets.... Total assets ....... 2,565 3,722 430 10,747 1,568 1,407 3,368 213 470 17,773 12,918 1,143 1,066 3,368 412 512 19,419 $ 2,721 S 4,068 5,309 1,254 2,450 1,665 4,115 5304 392 259 10,070 303 10,934 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses. Customer deposits and deferred revenue. Total current liabilities. Long-term debt...... Income taxes payable.... Other liabilities........ Total liabilities ... Commitments and contingencies (Note 14) Stockholders' equity Preferred stock: 8.01 par value per share; I shares authorized: no shares issued Common stock: 9.01 par value per share: 2.500 shares authorized: 967 and 1,060 shares outstanding at 2018 and 2017, respectively Additional paid in capital Retained camnings Treasury stock: 1,019 and 917 shares at 2018 and 2017 respectively Accumulated other comprehensive loss Total stockholders' equity Total liabilities and stockholders' equity 7.274 20,874 (21,194) (125) 6,839 17.773 $ 7056 18,258 (15,912) (64) 9349 19,419 S
