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Financial Management Quiz: iPhone Case Study

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Financial Management Quiz: iPhone Case Study
iPhone at Apple, Inc.:
The case provides students with an understanding of the criteria for revenue recognition and the role of accrual accounting in reflecting timing differences between cash receipts and product/service delivery, especially in situations where there are multiple deliverables.

The case also enables students to reflect on (a) the use of supplementary non-GAAP disclosures, (b) the impact of accounting on firm value and (c) the role of companies in the standard setting process.

Reading assignment:
Pages 260 – 265 of the text
Class notes handout.

Assignment questions: 1. Complete the Oracle example in the class notes handout. (Do not turn in.) 2. Suppose a customer buys an an iPhone from Apple for $500 on January 1, 2010. The cost of the iPhone to Apple is $350. Assume that the customer is entitled to upgrades over the next two years. Use the following financial statement effects template (FSET) to illustrate the financial statement impacts for Apple of the customer's iPhone purchase on the date of the initial purchase and at the end of each of the two years following the initial purchase under generally accepted accounting principles (GAAP). | Assets | = | Liabilities | + | Owners' Equity | | Revenues | Expenses | Net Income | January 1, 2010: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Impact on January 1, 2010 | | | | | | | | | | | | | | | | | | | | December 31, 2010: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Impact for 2010 | | | | | | | | | | | | | | | | | | | | December 31, 2011: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Impact for 2011 | | | | | | | | | | | | | | | | | | | | Cumlative Impact after 2 years | | | | | | | | | |

3. Using the same facts as in 2. above,
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