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Apple Inc. designs, manufactures, and markets personal computers and related software. Apple also manufactures and distributes music players (iPod) and mobile phones (iPhone) along with related accessories and services, including online distribution of third-party music, videos, and applications. The following information was taken from a recent annual report of Apple: Property, Plant, and Equipment (in millions): a. Compute the book value of the fixed assets for the current year and the preceding year and explain the differences, if any. b. Would you normally expect Apple’s book value of fixed assets to increase or decrease during the year? Why?
Financial Accounting
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Financial Accounting
Apple Inc. designs, manufactures, and markets personal computers and related software. Apple also manufactures and distributes music players (iPod) and mobile phones (iPhone) along with related accessories and services, including online distribution of third-party music, videos, and applications. The following information was taken from a recent annual report of Apple:
Property, Plant, and Equipment (in millions):
- a. Compute the book value of the fixed assets for the current year and the preceding year and explain the differences, if any.
- b.
Would you normally expect Apple’s book value of fixed assets to increase or decrease during the year? Why?
a.
Compute the book value of the fixed assets for the current year and the preceding year.
Explanation of Solution
Fixed Assets: It refers to the long-term assets having a useful life of more than a year which is, acquired by a company to be used in its business activities, for generating revenue. Examples of fixed assets are Plant, Property, Equipment, Land, and Buildings.
Compute the book value of the fixed assets for the current year and the preceding year.
| Particulars | Current Year in millions ($) | Preceding Year in millions ($) |
| Cost of the fixed assets: | ||
| Land and buildings | 6,956 | 4,863 |
| Machinery, equipment, and internal-use software | 37,038 | 29,639 |
| Other fixed assets | 5,263 | 4,513 |
| Total fixed assets | 49,257 | 39,015 |
| Less: Accumulated depreciation and amortization | (26,786) | (18,391) |
| Book Value | 22,471 | 20,624 |
Table (1)
The book value has increased from the preceding year to the current year by
b.
Explain whether it is normally expected that Company A’s book value of fixed assets would increase or decrease during the year.
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