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Financial Statement Analysis for Apple, Inc

Analyze the financial statements of a publicly traded company.

Obtain an annual report from a publicly traded corporation that is interesting to you. Be sure the company has property and equipment, intangible assets, and long-term debt on their balance sheet. Using techniques you have learned, respond to the following questions:

1. What is the amount of property and equipment on the balance sheet for the two most recent years? What is the amount of depreciation expense? What amounts are on the cash flow statement for the most recent year that relate to depreciation, gains and sales of property and equipment, and purchases and sale of property of equipment? What amounts are permitted for inclusion in the capitalized cost of property and equipment?

2. Looking at the footnote disclosures of the company, what are the individual components of property and equipment? For example, what are the amounts for land, building, equipment, accumulated depreciation, and so forth? How do companies account for nonmonetary exchange and dispositions of property and equipment?

3. Does the company have intangible assets? If so what are the types of intangible assets (patent, copyrights, etc.) and their amounts? What is the amount of amortization expense? What amounts on the most recent cash flow statement relate to the purchase and sale of intangible assets? How do intangible assets differ from property and equipment? What costs do we include in intangible assets?

4. Does the company have goodwill? What are the footnote disclosures relating to goodwill and the related acquisition? Please also describe the calculation of goodwill and how we account for differences between fair value and book value of assets acquired.

5. What are the company's depreciation methods? What is the range of estimated useful lives used for depreciating their assets? Does the company use the same depreciation methods for financial statements and tax returns? If not, please describe the methods used for tax purposes.

6. What are the company's footnote disclosures relating to impairment? Please also describe how to determine if an impairment exists and how to calculate the impairment loss.

7. What are the amounts and descriptions for the company's current liabilities for the most recent year? Does the company have any contingent liabilities? If yes, please describe. What are the three categories of contingent liabilities and the treatment for each type? Does the company have any subsequent events disclosed in their footnotes? If so, please describe them.

8. What are the amounts and descriptions for all of the company's long-term liabilities on their balance sheet for the most recent two years? What is the interest expense for the two most recent years? What amounts are included in the cash flow statements for proceeds from issuance of debt and repayment of debt for the most recent year? For each note payable discussed in the footnotes disclosures, what is the interest rate, total amount borrowed, and maturity date?

9. Does the company have bonds payable? If so, what are the amounts? Please also describe how bonds payable differ from notes payable and how to account for the issuance of bonds at par, at a discount, and at a premium. How is the discount and premium amortized? What is the effective interest method?

10. Does the company have capital leases? If so, what are the amounts and terms of the leases? What are the four criteria for a lease to be considered a capital lease? What are the additional criteria for the lessor? What is the difference between a sales-type lease and a direct financing lease?

Even though this is not a scientific-type writing assignment, references are still very important. At least three authoritative, outside references are required (articles and web pages with anonymous authors are not acceptable). These should be listed on the Works Cited page.

Solution Preview

Question 1
2010 2009
Property and equipment, net 4,768 2,954
Depreciation expense 1,027 734
Cash flow:
Depreciation 1,027 734
Loss on sale of property and equipment 24 26
Sale of property and equipment
Purchase of property and equipment 2,005 1,144
Capitalized cost of property and equipment
1. Purchase cost
2. Delivery cost
3. Costs to make PPE ready for its intended use
4. Interest expense related to debts specifically secured to build such PPE

Question 2
Components of PPE 2010 2009
Land and buildings 1,471 955
Machinery, equipment and internal-use software 3,589 1,932
Office furniture and equipment 144 115
Leasehold improvements 2,030 1,665
Gross property, plant and equipment 7,234 4,667
Accumulated depreciation and amortization (2,466) -1,713
Net property, plant and equipment 4,768 2,954

Non-monetary exchanges are ordinarily accounted for based on the fair value of the asset given up or received whichever is more evident. Moreover, companies need to recognize gains or losses arising from non-monetary exchanges with commercial substance (Kieso, Weygandt & Warfield, 2008).

Dispositions of property, plant and equipment are accounted for depending on how such assets were disposed of.
1. Sale
2. Involuntary conversion
3. Miscellaneous problems

Question 3
Intangible assets 2010 2009
Definite lived and amortizable acquired intangible assets 487 323
Accumulated amortization 245 176
Subtotal 242 147
Indefinite lived and unamortizable trademarks 100 100
Accumulated amortization - -
Subtotal 100 100
Total 342 247

Amortization expense 1,027 ...

Solution Summary

Financial statement analysis for Apple, Inc are examined.