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Chapter 3: Q2BTN_2 (page 164)

Key figures for the recent two years of both Apple and Google follow.
Required
1. Compute profit margins for (a) Apple and (b) Google for the two years of data shown.
2. Which company is more successful on the basis of profit margin? Explain.
3. Compute the current ratio for both years for both companies.
4. Which company has the better ability to pay short-term obligations according to the current ratio?
5. Analyze and comment on each company’s current ratios for the past two years.
6. How do Apple’s and Google’s current ratios compare to their industry (assumed) average ratio of 2.0?
Apple Google
\( millions Current Year Prior Year Current Year Prior Year
Net income . \) 53,394 \( 39,510 \)16,348 $14,136
Net sales . 233,715 182,795 74,989 66,001
Current assets . . . . . . . . . . . . . . . 89,378 68,531 90,114 78,656
Current liabilities 80,610 63,448 19,310 16,779

Short Answer

Expert verified

Apple company has more successful because profit margin of current and pervious year of Apple company is more than the Google company.

Step by step solution

01

Step-by-Step SolutionStep 1: Definition of net profit margin

Net profit margin is the ratio which shows the profit earning ability of the company.

02

Apple company net profit margin

Apple company has more success on the basis of a profit margin because Apple company has more net profit margin than the Google company. In current year, profit margin of Apple company is 22.84% which is more than the Google company that have profit margin of 21.80%.

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Most popular questions from this chapter

Cal Consulting follows the practice that prepayments are debited to expense when paid, and unearned

revenues are credited to revenue when cash is received. Given this company’s accounting practices,

which one of the following applies to the preparation of adjusting entries at the end of its first accounting

period?

a. Unearned fees (on which cash was received in advance earlier in the period) are recorded with a debit

to Consulting Fees Earned of \(500 and a credit to Unearned Consulting Fees of \)500.

b. Unpaid salaries of \(400 are recorded with a debit to Prepaid Salaries of \)400 and a credit to Salaries

Expense of \(400.

c. Office supplies purchased for the period were \)1,000. The cost of unused office supplies of \(650 is

recorded with a debit to Supplies Expense of \)650 and a credit to Office Supplies of \(650.

d. Earned but unbilled (and unrecorded) consulting fees for the period were \)1,200, which are recorded

with a debit to Unearned Consulting Fees of \(1,200 and a credit to Consulting Fees Earned

of \)1,200.

Question: Why is the accrual basis of accounting generally preferred over the cash basis?

In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.

A. Current assets E. Current liabilities

B. Long-term investments F. Long-term liabilities

C. Plant assets G. Equity

D. Intangible assets

7. Copyrights

In the blank space beside each numbered balance sheet item, enter the letter of its balance sheet classification. If the item should not appear on the balance sheet, enter a Z in the blank.

A. Current assets

B. Long-term investments

C. Plant assets

D. Intangible assets

E. Current liabilities

F. Long-term liabilities

G. Equity

3. Prepaid rent

Question: Prepare adjusting journal entries for the year ended (date of) December 31, 2017, for each of these separate situations.

(Entries can draw from the following partial chart of accounts: Cash; Accounts Receivable; Supplies;

Prepaid Insurance; Equipment; Accumulated Depreciation—Equipment; Wages Payable; Unearned Revenue;

Revenue; Wages Expense; Supplies Expense; Insurance Expense; Depreciation Expense—Equipment.)

a. Depreciation on the company’s equipment for 2017 is computed to be \(18,000.

b. The Prepaid Insurance account had a \)6,000 debit balance at December 31, 2017, before adjusting for

the costs of any expired coverage. An analysis of the company’s insurance policies showed that \(1,100

of unexpired insurance coverage remains.

c. The Office Supplies account had a \)700 debit balance on December 31, 2016; and \(3,480 of office

supplies were purchased during the year. The December 31, 2017, physical count showed \)300 of supplies

available.

d. Two-thirds of the work related to \(15,000 of cash received in advance was performed this period.

e. The Prepaid Insurance account had a \)6,800 debit balance at December 31, 2017, before adjusting for the

costs of any expired coverage. An analysis of insurance policies showed that \(5,800 of coverage had expired.

f. Wage expenses of \)3,200 have been incurred but are not paid as of December 31, 2017.

See all solutions

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