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

Answer:

The balance of the income summary account is $53,394

Step-by-step solution

Definition of fiscal year

The fiscal year is a time period in which the company operated and is liable to pay taxes.

Income summary account

The closing balance of the income statement is the balance after deducting all the expenses from the revenues. The closing balance of the income summary is shown in the balance under the head of equity and liabilities. The closing balance of the income summary account before it closed is $53,394.