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?

1. Go to Page 26 and read the portion under "Warranty Costs". Briefly describe whether you agree with this accounting treatment.
2. 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

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 impact on the Company's financial condition and operating results. Legal and Other Contingencies As discussed in Part I, Item 3 of this Form 10-K under the heading "Legal Proceedings" and in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 10, "Commitments and Contingencies," the Company is subject to various legal proceedings and claims that arise in the ordinary course of business. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgment. Except as described in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 10, "Commitments and Contingencies" under the heading "Contingencies," in the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss, or a material loss greater than a recorded accrual, concerning loss contingencies or asserted legal and other claims. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management's expectations, the Company's financial condition and operating results for that reporting period could be materially adversely affected. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate and Foreign Currency Risk Management The Company regularly reviews its foreign exchange forward and option positions and interest rate swaps, both on a stand-alone basis and in conjunction with its underlying foreign currency and interest rate exposures. Given the effective horizons of the Company's risk management activities and the anticipatory nature of the exposures, there can be no assurance these positions will offset more than a portion of the financial impact resulting from movements in either foreign exchange or interest rates. Further, the recognition of the gains and losses related to these instruments may not coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may adversely affect the Company's financial condition and operating results. Interest Rate Risk The Company's exposure to changes in Interest rates relates primarily to the Company's investment portfolio and outstanding debt. While the Company is exposed to global interest rate fluctuations, the Company's interest income and expense are most sensitive to fluctuations In U.S. interest rates. Changes In U.S. interest rates affect the interest earned on the Company's cash, cash equivalents and marketable securities and the fair value of those securities, as well as costs associated with hedging and interest paid on the Company's debt. Apple Inc. | 2019 Form 10-K | 26Apple Inc. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) September 28, 2019 September 29, 2018 ASSETS: Current assets: Cash and cash equivalents S 48,844 25,913 Marketable securities 51,713 40,388 Accounts receivable, net 22,926 23,186 Inventories 4.106 3,956 Vendor non-trade receivables 22,878 25,809 Other current assets 12.352 12.087 Total current assets 62,819 31,339 Non-current assets: Marketable securities 105.341 170,799 Property, plant and equipment, net 37,378 41,304 Other non-current assets 32.978 22.283 Total non-current assets 175,697 34,386 Total assets 338,516 $ 365,725 LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $ 46,236 $ 55,888 Other current liabilities 37,720 33,327 Deferred revenue 5,522 5.966 Commercial paper 5,980 1 1,964 Term debt 10,260 8,784 Total current liabilities 105,718 115,929 Non-current liabilities: Term debt 91,807 93,735 Other non-current liabilities 50,503 48,914 Total non-current liabilities 42,310 142.649 Total liabilities 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 45,174 40,201 Retained earnings 45,898 '0,400 Accumulated other comprehensive income/(loss) (584 ) (3,454 Total shareholders' equity 90,48 107,147 Total liabilities and shareholders' equity 338,516 $ 365,725 See accompanying Notes to Consolidated Financial Statements. Apple Inc. | 2019 Form 10-K | 31Apple Inc. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In millions, except per share amounts) Years ended September 28 2019 September 29, September 30, 2018 2017 Total shareholders' equity, beginning balances 107,147 $ 134,047 S 128,249 Common stock and additional paid-in capital: Beginning balances 40,201 35,867 31,251 Common stock issued 781 669 555 Common stock withheld related to net share settlement of equity awards (2,002) 1,778) (1,468) Share-based compensation 6,194 5,443 4,909 Tax benefit from equity awards, including transfer pricing adjustments 620 Ending balances 45,174 40,201 35.867 Retained earnings: Beginning balances 70,400 98,330 96,364 Net income 55,256 59,531 48,35 Dividends and dividend equivalents declared (14,129) (13,735) (12,803) Common stock withheld related to net share settlement of equity awards (1,029) (948) (581) Common stock repurchased (67,101) (73,056) 33,001) Cumulative effects of changes in accounting principles 2,501 278 Ending balances 45,898 70,400 8.330 Accumulated other comprehensive income/(loss): Beginning balances (3,454) (150) 634 Other comprehensive income/(loss) 2,781 (3,026) (784) Cumulative effects of changes in accounting principles 89 278 Ending balances (584) (3,454) (150) Total shareholders' equity, ending balances 90,488 S 107,147 $ 134,047 Dividends and dividend equivalents declared per share or RSU 3.00 2.72 $ 2.40 See accompanying Notes to Consolidated Financial StatementsShare-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 en en 6,068 $ 5,340 S 4,840 Income tax benefit related to share-based compensation expense (1,967) $ (1,893) S (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 $ 3,834 S 3,702 Cost of warranty claims (3,857) (4,115) (4,322) Accruals for product warranty 3,73 3,973 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 U.K. 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 liability 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, with some Mac computers manufactured in the U.S. and Ireland. Other Off-Balance Sheet Commitments Operating Leases The Company leases various equipment and facilities, including retail space, under noncancelable operating lease arrangements. The Company does not currently utilize any other off-balance sheet financing arrangements. As of September 28, 2019, the Company's total future minimum lease payments under noncancelable operating leases were $10.8 billion. The Company's retail store and other facility leases typically have original terms not exceeding 10 years and generally contain multi-year renewal options. Apple Inc. 1 2019 Form 10-K 1 51