These summary transactions are described in the far

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These summary transactions are described in the far left column of the following template. Each column is summed to arrive at the balance sheet and income statement totals that tie to Apple's statements. Detailed explanations for each transaction are provided after the template. Then, we use the information in the template to construct Apple's financial statements. Transaction Explanation Apple begins fiscal year 2010 with $47,501 million in total assets, consisting of $5,263 million of cash and $42,238 million of noncash assets. It also reports $15,861 million of liabilities and $31,640 million of stockholders' equity ($8,210 million of contributed capital and $23,430 million of earned capital, which includes other equity for this exhibit). During the year, eleven summary transactions occur that are described below. 1. Owner Financing. Companies raise funds from two sources: investing from shareholders and borrowing from creditors. Transaction I reflects issuance of common stock for $2,458 million. Cash is increased by that amount, as is contributed capital. Stock issuance (as well as its repurchase and any dividends paid to shareholders) does not impact income. Companies cannot record profit by trading in their own stock. 2. Purchase PPE financed by debt. Apple acquires $2,005 million of property, plant and equipment (PPE), and it finances this acquisition with a $2,005 million loan. Noncash assets increase by the $2,005 million of PPE, and liabilities increase by $2,005 million of long-term debt. PPE is initially reported on the balance sheet at the cost Apple paid to acquire it. When plant and equipment are used, a portion of the purchase cost is transferred from the balance sheet to the income statement as an expense called depreciation. Account- . ing for depreciation is shown in Transaction 9. The borrowing of money does not yield income, and repaying the principal amount borrowed is not an expense. Paying interest on liabilities, however, is an expense. 3. Purchase inventories on credit. Companies commonly acquire inventories from suppliers on credit (also called on account). The phrase "on credit" means that the purchase has not yet been paid for. A purchaser is typically allowed 30 days or more during which to make payment. When acquired in this manner, noncash assets (inventories) increase by the $40,137 million cost of the acquired inventory, and a liability (accounts payable) increases to reflect the amount owed to the supplier. Although inventories (iPods and iPhones, for example) nor- mally carry a retail selling price that is higher than cost, this eventual profit is not recognized until inventories are sold. 4. Sell inventories on credit. Apple subsequently sells inventories that cost $39,541 million for a retail selling price of $65,225 million on credit. The phrase "on credit" means that Apple has not yet received cash for the selling price; cash receipt is expected in the future.
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