Use Apple Inc.'s consolidated statement of cash flows along with the company's other consolidated financial statements, all in Appendix A and online in the filings section of www.sec.gov, to answer the following questions.
Requirements
1. By which method does Apple Inc. report cash flows from operating activities? How can you tell?
2. What type of activity (operating, financing, or investing) generated the most cash flows for Apple in 2014? Which activity type(s) used cash in 2014? Judging by the statement of cash flows only, is Apple a healthy company? Explain your answer.
3. Suppose Apple Inc., reported net cash flows from operating activities by using the direct method. Compute the following amounts for the year ended December 31, 2014 (ignore the statement of cash flows, and use only Apple Inc.'s income statement and balance sheet).
a. Calculate collections from customers and others. Prepare a T-account for Gross Accounts Receivable. Prepare another T-account for Allowance for Doubtful Accounts. Calculate the beginning and ending gross amounts of Gross Accounts Receivable by adding the beginning and ending balances of Allowance for Doubtful Accounts ($99 million and $86 million, respectively) to the net accounts receivable at both the beginning and end of the year. Assume that all sales are on account. Also assume that the company uses the percentage of net sales method for estimating doubtful accounts expense and that the company estimates this amount at 0.5%.
b. Calculate payments to suppliers. Apple Inc. calls its cost of goods sold "Cost of Sales." Assume all inventory is purchased on account and that all cash payments to suppliers are made from accounts payable.
c. Evaluate 2014 for Apple Inc. in terms of net income, total assets, stockholders' equity, cash flows from operating activities, and overall results. Be specific.