Apple simultaneously records a 931 mil lion increase

Info icon This preview shows pages 29–31. Sign up to view the full content.

View Full Document Right Arrow Icon
which reduces net income (and earned capital). Apple simultaneously records a $931 mil- lion increase in liabilities for its obligation to make future payment. This transaction is an accounting adjustment, or accrual. 8. Purchase noncash assets. Apple uses $18,288 million of its excess cash to purchase mar- ketable securities as an investment. Thus, noncash assets increase. This is a common use of excess cash, especially for high-tech companies that desire added liquidity to take advantage of opportunities in a rapidly changing industry. 9. Record depreciation. Transaction 9 is another accounting adjustment. In this case, Apple recognizes that a portion of its plant and equipment is "used up" while generating revenues. Thus, it records a portion of the PPE cost as an expense during the period. In this case, $1,027 million of PPE cost is removed from the balance sheet and transferred to the income state- ment as depreciation expense. Net income (and earned capital) are reduced by $1,027 million. 10. Record investment income. Apple recognizes $155 of investment income in transaction 10. Profit increases by this same amount, resulting in an increase in retained earnings. 11. Miscellaneous. The final transaction is a miscellaneous adjustment to noncash assets and an earned capital account called accumulated other comprehensive income, which is distinct from retained earnings. We can use the column totals from the financial statement effects template to prepare Apple's financial statements (in condensed form). We derive Apple's 2010 balance sheet and income statement from the template as follows ($ millions). APPLE INC. Condensed Balance Sheet September 25, 2010 APPLE INC. Condensed Income Statement For Year Ended September 25,2010 Revenues. . . . • . . . . . . . . . . .. $65,225 Expenses. . . . . .. . . . . . . . . .. 51,212 Net income. . . . . . . . . . . . . . .. $14,013 Cash asset. . . . . . . . . . . . . . .. $11,261 Noncash assets. . . . . . . . . . .. 63,922 Total assets. . . . . . . . . . . . . .. $75,183 Liabilities . Contributed capital. . . . . •.. .. Earned capital . Total liabilities and equity . $27,392 10,668 37,123 $75,183 We can summarize Apple's cash transactions from the cash column of the template. The cash column of the financial effects template reveals that cash increases by $5,998 million during the year from $5,263 million to $11,561 million; see the following statement. Items that contribute to this net increase are identified by the cash entries in that column (the subtotals for operating, investing, and financing sections are slightly different from actual results because of simplifying assumptions we make for our transactions example).
Image of page 29

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Module 2 I Overview of Business Activities and Financial Statements 2-30 APPLE INC. Statement of Cash Flows ($ millions) "' For Year ~nded September 25, 2010 ODerating cash flows (+ $31,541 - $9,868 + $155) . ~ting cash flows . r1nancing cash flows . . . . . . . . •... . ............................ •. change in cash ............ •..• ............................ Cash balance, Sep. 26, 2009 ............... .................... Cash balance, Sep. 25, 2010 ............................ ....... $21,828 (18,288) 2,458 5,998 5,263 $11,261 ment of stockholders' equity summarizes the transactions relating to its equity -=:::JI::IS.. This statement follows and is organized into its contributed capital and earned capital ::I::~:i:s of equity.
Image of page 30
Image of page 31
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern