Refer to the financial statements of Apple in Appendix A to answer the following.

1. Compute times interest earned for the fiscal years ended 2014, 2013, and 2012. Apple reports that in 2014 interest expense was $384 million, in 2013 interest expense was $136 million, and in 2012 it "had no debt outstanding and accordingly did not incur any related interest expense"; however, for purposes of learning from this assignment, assume that Apple had interest expense of $100 million for 2012. Comment on Apple's ability to cover its interest expense for this period. Assume an industry average of 10 for times interest earned.

2. Apple's current liabilities include "Deferred revenue"; assume that this account reflects "Loyalty reward liabilities." Is this a known or an estimated liability? Explain how this liability is created.

3. Identify Apple's total of accrued expenses and search its footnotes to list the six accounts that make up accrued expenses.

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4. Access Apple's financial statements for fiscal years ending after September 27, 2014, at its website (Apple.com) or the SEC's EDGAR database (www.SEC.gov). Compute its times interest earned for years ending after September 27, 2014, and compare your results to those in part 1. If no interest expense is reported, assume $100 million of interest expense in each year?

The financial statements of Apple in Appendix A

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Apple Inc. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) September 27, 2014 September 28, 2013 ASSETS: Current assets: Cash and cash equivalents Short-term marketable securities Accounts receivable, less allowances of $86 and $99, respectively Inventories 24 13,844 14,259 11,233 26,287 13,102 1,764 17,460 2,111 Deferred tax assets 4,318 3,453 Vendor non-trade receivables 9,759 7,539 Other current assets 9,806 6,882 68,531 130,162 Total current assets 73,286 Long-term marketable securities Property, plant and equipment, net Goodwill 106,215 20,624 16,597 4,616 1,577 Acquired intangible assets, net 4,142 4,179 5,146 Other assets 3,764 Total assets 231,839 207,000 LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: %24 Accounts payable Accrued expenses 30,196 22,367 13,856 18,453 Deferred revenue 8,491 7,435 Commercial paper 6,308 Total current liabilities 63,448 43,658 Deferred revenue – non-current 3,031 2,625 Long-term debt 28,987 16,960 Other non-current liabilities 24,826 20,208 83,451 Total liabilities 120,292 Commitments and contingencies Shareholders' equity: Common stock and additional paid-in capital, $0.00001 par value; 12,600,000 shares authorized; 5,866,161 and 6,294,494 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income/(loss) Total shareholders' equity Total liabilities and shareholders' equity 23,313 19,764 87,152 104,256 1,082 (471) 123,549 111,547 231,839 207,000