Question

Selected data from the September 27, 2014, and September 28, 2013, consolidated balance sheets and income statements for the years then ended for Apple Inc. follow. All amounts are reported in millions. 2014 2013 Net sales $ 32,079 $ 20,450 Cost of sales 22,334 15,352 Research and development expenses 1,054 777 Selling, general, and administrative expenses 3,736 2,873 Operating income ? ? Other income, net ? 529 Provision for income taxes 2,066 ? Net income $ 4,869 $ 3,566 Required:

a-1. Calculate the amount of Apple’s gross profit for each year. (Enter your answers in millions of dollars.)

Gross profit 2014=

Gross profit 2013+

a-2. Has gross profit as a percentage of sales changed significantly during the past year? Yes No

b-1. Calculate the amount of Apple’s operating income for each year. (Enter your answers in millions of dollars.)

Operating income for 2014

Operating income for 2013

b-2. Has operating income as a percentage of sales changed significantly during the past year?Yes No c.

After completing requirements a and b, calculate the other missing amounts for each year. (Enter your answers in millions of dollars. Negative amounts should be indicated by a minus sign.)

Operating income for                 2014           2013

Other income, net                                           529

Income before taxes

Provision for income taxes       (2066)

Net income                               4869              3566

Answer 1

                                                                                                                        Amount $
a 1. computation of gross profit

	2014	2013
sales (S)	32,079	20,450
Less: cost of goods sold	(22,334)	(15,352)
gross profit (GP)	9,745	5,098
Gross profit ratio (GP/S*100)	30%	25%

a 2. Yes, gross profit ratio has been increased by 5% during 2014 in comparison with 2013

b 1. computation of operating income

	2014	2013
gross profit	9,745	5,098
Less: operating expense
Research and development expenses	(1,054)	(777)
Selling, general, and administrative expenses	(3,736)	(2,873)
Operating Income (OI)	4,955	1,448
operating income as a percentage of sales (OI/S*100)	15%	7%

b 2. Yes, Operating income as a percentage of sales has been increased by 8% during 2014 compared to 2013

c Computation of missing figures

	2014	2013
Operating Income (OI)	4,955	1,448
Add: other income	1,980***	529
net income before tax	6,935**	1,977
Less: Income tax provision	(2,206)	(-1,589)*
net income	4,869	3,566

* net income = income before tax - income tax provision = 3,566 = 1977 - income tax provision

Income tax provision = -1,589

** net income = income before tax - income tax provision = 4,869 = income before tax - 2206

income before tax = 6,935

*** net income before tax = operating income + other income = 6,935 = 4,995 + other income

other income = 1,980