A number of different standards are available and in use throughout the globe but the central contention remains the same. This report will look into the financial instruments used by Apple Inc. through the use of its reported 10 – K form for the fiscal year 2012 and how various journal entries tend to affect the earning per share (EPS) and the net income. Various journal entries will be administered to the 10 – K based financial instruments and their effects will be discussed. Journal Entries The financial statement of Apple Inc. for the year 2012 in the form of a 10 – K form is being used for analysis (Apple Inc. 43-44). The consolidated balance sheet for Apple Inc. is presented below and will be referred to when journal entries are being discussed. Journal EntriesThe financial statement of Apple Inc. for the year 2012 in the form of a 10 – K form is being used for analysis (Apple Inc. 43-44). The consolidated balance sheet for Apple Inc. is presented below and will be referred to when journal entries are being discussed.
29-Sep-12 ASSETS Current Assets: Cash and cash equivalents $ 10,746 Short-term marketable securities 18,383 Accounts receivable, less allowance of $98 and $53, respectively 10,930 Inventories 791 Deferred tax assets 2,583 Vendor non-trade receivables 7,762 Other current assets 6,458 Total current assets 57,653 Long-term marketable securities 92,122 Property, plant and equipment net 15,452 Goodwill 1,135 Acquired intangible assets, net 4,224 Other assets 5,478 Total assets 176,064 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 21,175 Accrued expenses 11,414 Deferred revenue 5,953 Total current liabilities 38,542 Deferred revenue non-current 2,648 Other non-current liabilities 16,664 Total liabilities 57,854 Commitments and contingencies Shareholder's equity: Common stock no par value, 1,800,000 shares authorized; 939,208 and 929,277 shares issued and outstanding respectively 16,422 Retained earnings 101,289 Accumulated other comprehensive income 499 Total shareholder's equity 118,210 Total liabilities and shareholders' equity 176,064 Issuance of Shares The first journal entry concerns the issuance of common stock by Apple Inc. It is supposed that Apple Inc. issues another million shares of common stock where each share is valued at $5 each. It is also assumed that all issued shares are bought off by the general public at the issuance price of $5 per share. This leads to a revenue generation of five million USD in the shape of cash. Only two accounts will be affected with the sale of common stock. The assets tab is increased as cash is increased by five million USD. The equilibrium of the balance sheet is restored when the released common stock is registered as the stockholders’ equity with an increase of a million shares. The net income of Apple Inc. will register no increase since any new income sources have not been added by sale of common stock. In contrast, the EPS of Apple Inc. will be affected as the number of shares has gone up to 2.8 million while the earnings have remained the same. The previous earning level of $41,733 million has remained the same while the number of shares has increased by one million. Consequently, the EPS would decrease from the current $44.64 (basic) to $21.57 per share (basic). The journal entries are shown in the table below: Cash and cash equivalent 5 Common stock no par value, 2,800,000 shares authorized; 1,939,208 and 929,277 shares issued and outstanding respectively 5 Acquisition of Equipment It is supposed that Apple Inc. acquires equipment worth one hundred million dollars. In addition, Apple Inc. does not pay the entire amount upfront but pays 25 million dollars in the form of cash while it defers the payment of 75 million dollars using signed notes. In such a case, the equipment, which is considered an asset, is delivered immediately to Apple