Accounting Cycle Iphone Case

Good Essays
Accounting for the iPhone at Apple, Inc.
(HBS 9-111-003)

1. Exhibit 3 provides the journal entries under subscription accounting. Refer to the example in Exhibit 3.

a) Complete the following FSET assuming the Apple follows subscription accounting to account for iPhone’s sales revenue (separately for the transaction in Quarter 1 and in Quarters 2 to 8).

Balance Sheet Income Statement
Transaction Cash Asset
+ Noncash Assets - = Liabilities + Contrib. Capital + Earned Capital Revenues - Expenses = Net Income
Q1. iPhone Sales +500

-350
Inventory
+306.25
Deferred Costs - = +437.5
Deferred Rev. +62.5

-43.75 +62.5 iPhone Rev. -

+43.75
COGS = +62.5

-43.75
Q2-8. Deferred Rev.

-43.75
Deferred
Costs - = -62.5
Deferred
Rev.

+62.5

-43.75 +62.5
Deferred Rev. -

+43.75
COGS
= +62.5

-43.75

b) Complete the following FSET assuming Apple recognizes all sales revenue from iPhone at the time of sale (i.e., only for quarter 1).

Balance Sheet Income Statement
Transaction Cash Asset
+ Noncash Assets - = Liabilities + Contrib. Capital + Earned Capital Revenues - Expenses = Net Income
Q1. iPhone Sales +500

-350
Inventory - = +500

-350 +500 iPhone Rev. -

+350
COGS = +500

-350

c) If Apple recognizes 100% of iPhone revenue at the time of sale (i.e., the second method) instead of following subscription accounting, how would it affect Apple’s balance sheet and income statement in Q1? In particular, which line items on each statement would be affected, and in what direction? Refer to the actual balance sheet and income statement provided in the case (Exhibit 1) in answering this question.

The balance sheet in Exhibit 1 would show a larger increase in Retained Earning and a decrease in Unearned Revenue. The deferred costs within the Noncash Assets section would go to zero. Furthermore, the Q1 income statement

You May Also Find These Documents Helpful

  • Powerful Essays

    The Life Cycle of Iphone

    • 2674 Words
    • 11 Pages

    called the product life cycle. Many factors, such as competition and technology, affect brands and their product life cycle. Nevertheless, brands or products typically go through five stages of growth: development, introduction, growth, maturity and decline. Characteristics for each stage differ and in response to the different needs of the product as it moves through its life cycle, the market mix used during these stages differ as well. Understanding the product life cycle can help business owners…

    • 2674 Words
    • 11 Pages
    Powerful Essays
  • Satisfactory Essays

    http://www.casetutors.com/2735/Accounting-forthe-iPhone-at-Apple-Inc.html Accounting for the iPhone at Apple Inc Case ID - 111003 Abstract Solution ID - 2735 1277 Words Apple Inc bundled the cost of future software upgrade in the price of iphone. This led to a grave problem as Apple had to follow the subscription method of accounting by recognizing only a portion of overall revenue. This situation adversely affected the financial performance of Apple as investors were expecting high EPS. Partially…

    • 300 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    Accounting Cycle

    • 29411 Words
    • 118 Pages

    THE ACCOUNTING CYCLE LARRY M. WALTHER & CHRISTOPHER J. SKOUSEN DOWNLOAD FREE TEXT BOOKS AT BOOKBOON.COM The Accounting Cycle © 2009 Larry M. Walther, under nonexclusive license to Christopher J. Skousen & Ventus Publishing ApS. All material in this publication is copyrighted, and the exclusive property of Larry M. Walther or his licensors (all rights reserved). ISBN 978-87-7681-486-1 Download free books at BookBooN.com 2 Contents The Accounting Cycle Contents Part 1:…

    • 29411 Words
    • 118 Pages
    Powerful Essays
  • Good Essays

    The Accounting Cycle

    • 760 Words
    • 4 Pages

    The Accounting Cycle Kaplan University AB114-02 Accounting I Professor Richard Franchetti Barbara Kerr April 8, 2013 THE ACCOUNTING CYCLE 1 The accounting cycle begins with analyzing and journalizing transactions and ends with preparing the accounting records for the next period. There are ten steps one must follow in the accounting cycle. The first step in the accounting cycle is to analyze and record transactions in the journal using the double entry-accounting…

    • 760 Words
    • 4 Pages
    Good Essays
  • Satisfactory Essays

    Iphone Product Life Cycle

    • 294 Words
    • 2 Pages

    Product Life Cycle Every product has a limited life. Product life cycle describes the profit and sales earned by a product over its whole life. There are fives stages: product development, introduction, growth, maturity and decline. iPhone is a new technology advance and it has already gained a favorable result in the market. Therefore, it should be in the growth stage now. On April 2003 our CEO believes that cell phones were going to become important appliances for portable information access…

    • 294 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    The Accounting Cycle

    • 1023 Words
    • 5 Pages

    The Accounting Cycle Presented to Ms. Aisha Meeks Department of Business Management College of Business Administration Alabama State University In Partial Fulfillment of the Requirements for the Course ACT.214.04 By Krystal Hall January 26, 2013 Memo: To: Ms. Aisha Meeks From: Krystal Hall Date: 2/26/2013 Re: The Accounting Cycle Every company has an accounting cycle. An Accounting cycle is the process that begins with analyzing and journalizing transactions and it ends with…

    • 1023 Words
    • 5 Pages
    Good Essays
  • Powerful Essays

    Accounting Cycle

    • 1070 Words
    • 5 Pages

    The purpose of this assignment is to select a step in the accounting cycle that is not currently automated at one of our team members ' organization. The place of business we have selected is an independent financial brokerage firm, LPL Financial. The firm places a strong emphasis on the recruiting of established financial advisors throughout the country. When a financial advisor joins LPL Financial, so does their clients. One of our team member 's works in the transfer department. The transfer…

    • 1070 Words
    • 5 Pages
    Powerful Essays
  • Satisfactory Essays

    Accounting Cycle

    • 641 Words
    • 2 Pages

    Complete accounting cycle For the past several years, Abby Brown has operated a part-time consulting business from her home. As of June 1, 2012, Abby decided to move to rented quarters and to operate the business, which was to be known as Square One Consulting, on a full-time basis. Square One Consulting entered into the following transactions during June: June 1. The following assets were received from Abby Brown: cash, $30,000; accounts receivable, $7,500; supplies, $2,000; and office equipment…

    • 641 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Accounting Cycle 15

    • 302 Words
    • 2 Pages

    Accounting Cycle 1. Identifying and Recording - The first step in the accounting cycle is analysis of transactions and selected other events. The first problem is to determine what to record. 2. Journalization- chronologically lists transactions and other events, expressed in terms of debits and credits to accounts. 3. Posting - The procedure of transferring journal entries to the ledger accounts. 4. Trial balance - lists accounts and their balances at a given time. 5. Adjustments -…

    • 302 Words
    • 2 Pages
    Satisfactory Essays
  • Better Essays

    Accounting Cycle 8

    • 1070 Words
    • 5 Pages

    Accounting Cycle Paper Every business small, medium or large uses an accounting cycle to collect and process transactions from events to prepare financial statements to interested parties. The accounting cycle consist of eight steps (1) analyzing transactions and other events, (2) journalizing, (3) posting; (4) preparing trail balance, (5) adjusting entries, (6) preparing adjusting trial balance; (7) preparing financial statements; and (8) closing process (Kieso, Weygandt, & Warfield, 2007, p. 93)…

    • 1070 Words
    • 5 Pages
    Better Essays