Question

Refer to Apple’s financial statements in Appendix A to answer the following.

1. Identify and write out the revenue recognition principle as explained in the chapter.

2. Review Apple’s footnotes (in Appendix A and/or from its 10-K on its website) to discover how it

applies the revenue recognition principle and when it recognizes revenue. Report what you

discover.

3. What is Apple’s profit margin for fiscal years ended September 26, 2015, and September 27, 2014.

4. For the fiscal year ended September 26, 2015, what amount is credited to Income Summary to summarize

its revenues earned?

5. For the fiscal year ended September 26, 2015, what amount is debited to Income Summary to summarize

its expenses incurred?

6. For the fiscal year ended September 26, 2015, what is the balance of its Income Summary account

before it is closed?

Fast Forward

7. Access Apple’s annual report (10-K) for fiscal years ending after September 26, 2015, at its website

(Apple.com) or the SEC’s EDGAR database (SEC.gov). Assess and compare the September 26,

2015, fiscal year profit margin to any subsequent year’s profit margin that you compute.

Short answer

As per the footnote, Apple recognise the revenue on the basis of accrual concept.

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of revenue

Revenue is the money company get after the sales of the product in normal course of business.

Revenue recognition principle

Apple company recognize revenue when it gets evidence that the goods are delivered, sales price are fixed. The product of the company is accepted as delivered when the ownership of the product is transferred or the product has been shipped.