Chapter 10, Problem 1AA

To determine

Concept Introduction:

Straight line method of depreciation:

This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:

  $AnnualStraightlinedepreciation=\frac{\left(Cost-SalvageValue\right)}{Estimatedlifeinyears}$

Requirement-1:

To Calculate:

The percentage of original cost of Apple's Property plant and equipment account remains to be depreciation as on Sept. 30, 2017 and as on Sept. 24, 2016

Answer to Problem 1AA

The percentage of original cost of Apple's Property plant and equipment account remains to be depreciation as on Sept. 30, 2017 and as on Sept. 24, 2016 are as follows:

	Sept. 30, 2017	Sept. 24, 2016
% Amount to be depreciated	45.0%	44.1%

Explanation of Solution

The percentage of original cost of Apple's Property plant and equipment account remains to be depreciation as on Sept. 30, 2017 and as on Sept. 24, 2016 are calculated as follows;

$ in Millions	Sept. 30, 2017	Sept. 24, 2016
Gross property, plant and equipment (A)	75,076	61,245
Net property, plant and equipment (B)	33,783	27,010
% Amount to be depreciated (B/A)	45.0%	44.1%

To determine

Concept Introduction:

Amortization of Intangible Assets:

Intangible assets are not physical assets which can be depreciated over its life. Hence to amortize the cost of the intangible asset, amortization expense is recorded in the books. The nature of the Amortization is same as of the depreciation. An intangible asset is amortized using the straight line method over its life.

Requirement-2:

To Identify:

If Apple capitalizes or expense the research and development cost

Answer to Problem 1AA

Apple capitalizes and amortizes the research and development cost over the life of the product

Explanation of Solution

Intangible assets are not physical assets which can be depreciated over its life. Hence to amortize the cost of the intangible asset, amortization expense is recorded in the books. The nature of the Amortization is same as of the depreciation. An intangible asset is amortized using the straight line method over its life.

Apple capitalizes and amortizes the research and development cost over the life of the product

To determine

Concept Introduction:

Total Asset Turnover Ratio:

Asset Turnover Ratio is an efficiency ratio that represents the sales earned on the average assets invested in the business. It is calculated by dividing the Sales by Average total assets. The formulas to calculate the Asset Turnover Ratio is as follows:

  $AssetTurnoverRatio =\frac{Sales}{Averagetotalassets}$

Requirement-3:

To Calculate:

Total assets turnover for Apple for the year ended Sept. 30, 2017 and Sept. 24, 2016

Answer to Problem 1AA

Total assets turnover for Apple for the year ended Sept. 30, 2017 and Sept. 24, 2016 are as follows:

	Sept. 30, 2017	Sept. 24, 2016
Total assets turnover	0.66	0.70

Explanation of Solution

Total assets turnover for Apple for the year ended Sept. 30, 2017 and Sept. 24, 2016 are calculated as follows:

$ in Millions	Sept. 30, 2017	Sept. 24, 2016
Sales (A)	229,234	215,639
Beginning Total Assets (B)	321,686	290,345
Ending Total Assets (C)	375,319	321,686
Average Total Assets (D) =(B+C)/2	348,503	306,016
Total assets turnover = (A/D)	0.66	0.70

To determine

Concept Introduction:

Total Asset Turnover Ratio:

Asset Turnover Ratio is an efficiency ratio that represents the sales earned on the average assets invested in the business. It is calculated by dividing the Sales by Average total assets. The formulas to calculate the Asset Turnover Ratio is as follows:

  $AssetTurnoverRatio =\frac{Sales}{Averagetotalassets}$

Requirement-4:

To Identify:

If the Total assets turnover for Apple for the year ended Sept. 30, 2017 and Sept. 24, 2016 is showing favorable or unfavorable trend

Answer to Problem 1AA

The Total assets turnover for Apple for the year ended Sept. 30, 2017 and Sept. 24, 2016 is showing unfavorable trend.

Explanation of Solution

Total assets turnover for Apple for the year ended Sept. 30, 2017 and Sept. 24, 2016 are as follows:

	Sept. 30, 2017	Sept. 24, 2016
Total assets turnover	0.66	0.70

Hence, The Total assets turnover for Apple for the year ended Sept. 30, 2017 and Sept. 24, 2016 is showing unfavorable trend.