Question

Congratulations, you are in the final stage of completing Intermediate Accounting I which means that you now have a strong foundation in financial accounting principles and the elements of the financial statements. You will be amazed at how much you actually know and understand about accounting.

Due Date: Submit a printed hard copy on Tuesday, December 4^th at the beginning of class.

NO LATE SUBMISSIONS WILL BE ACCEPTED.

Instructions: Use the financial statements from the annual report for the year ended 12/30/2017 for INTEL Corporation. The Annual Report is on MOODLE. Answer the questions after each question. Use a different font to distinguish your answer from the question. All answers should be in your own words. Do not cut and paste from the annual report. Answers will be graded for content and written communication skills. Use complete sentences in answering questions.

MAKE A NOTATION HERE IF THE DOLLAR AMOUNTS ARE STATED IN MILLIONS.

1. Who are the external auditors for INTEL? What does their Report of Independent Registered Public Accounting firm indicate about the amounts represented in the company’s financial statements?

2. What specific title does INTEL use for its income statement? What type of income statement do they issue? (multi-step, single–step) Explain.

3. How does Intel define Cash Equivalents? Is this consistent with the textbook?

4. What is the amount of cash and cash equivalents reported for the year ended at 12/31/2016 and 12/30/2017? By how much has cash and cash equivalents increased/decreased? Show calculations.

5. Create a table illustrating the amount INTEL for net cash flows from operating, investing, and financing activities in its statement of cash flow for the year ended 12/30/2017. Show calculations. Compare your answers to question 4.

6. What is INTEL’s cost flow assumption for valuing inventory (LIFO, FIFO, average-cost, specific identification)? How are INTEL’s inventories valued (cost, market, or other method)?

7. What % of their total inventory is raw materials, work in process, and finished goods as of 12/30/2017?

8. Which depreciation method is used for PP& E? What estimates are made for the useful life of depreciable assets?

9. What was total depreciation expense in 2017? Where were these amounts reported in the financial statements?

10. What was the major component of total gross PP&E? What was its amount and what % was it of the total gross amount?

11. What % of total gross PP&E has been depreciated?

12. What amount of total dividends was paid for the year ended 12/30/2017?

13. Did INTEL purchase any property, plant and equipment during the year ended 12/30/2017? If so, what were the dollar amount?

14. What was INTEL’s current ratio and working capital as of 12/30/2017?

15. In a two detailed paragraph, indicate a couple of interesting items you learned while reading this annual report.

Answer 1

1..(Pg. 58 & 59) Ernst & Young LLP

As per their opinion, the amounts represented in the company's financial statements are true & fair and in conformity with the US GAAP.Their internal control system was verified and found to be as agreed to the COSCO criteria.

2..Consolidated statements of Income   &

Consolidated statements of Comprehensive Income (pg. 60 & 61)

They use multi-step income statement--ie. Showing

Gross margin, operating income, income before taxes & net income---showingly distinctly all expenses incurred at each stage separately.

3.. Pg. 67

Intel considers all liquid investments with maturities of three months or less as cash equivalents. Towards this end, it includes investments such as corporate debt, financial institution instruments, government debt & available for sale investments.

Yes. This is quite consistent with the liquidity principle-ie.quickness with which the asset can be converted to cash.

4…(Fig. in Mlns.)
12/31/2016	5560
12/31/2017	3433
Decreased by
(5560-3433)=	2127

5…	12/31/2017	12/31/2016	12/31/2015
Net CF Operating	22110	21808	19018
Net CF Investing	-15762	-25817	-8183
Net CF Financing	-8475	-5739	-1912
Net cash used	-2127	-9748	8923
Shows the same amt. of decrease (2127) as in 4. above.

6. Intel's cost flow assumption for valuing inventory---FIFO

Inventory is valued at lower of cost or net realisable value.

7….
Fig. in.mlns.	Dec.30,2017	% to Total	Dec.30,2016	% to Total
Raw materials	1,098	15.72%	695	12.52%
Work in process	3,893	55.75%	3,190	57.45%
Finished goods	1,992	28.53%	1,668	30.04%
Total inventories	6,983	100.00%	5,553	100.00%

8.. Straight-line method of depreciation is provided to various PP&E at Intel ,over the estimated useful life of the depreciable assets.

Machinery and equipment, 2 to 5 years, and buildings, 10 to 25 years

9. Total depreciation expense in 2017---$ 6752 millions (pg. 63-- Operating activities section of the Cash flow statement)

Where were these amounts reported in the financial statements ? -Included in Cost of sales, & all operating expenses--in the consolidated statement of net income(pg.60)

10.Major component of total gross PP&E-- Machinery & equipment -- $ 57192 mlns.

% was it of the total gross amount=57192/100395=

56.97%

11..% of total gross PP&E that has been depreciated

Bal.in Acc. Depn./Gross PP&E

59286/100395=

59.05%

12.Amount of total dividends that was paid for the year ended 12/30/2017

$ 5072 millions

(pg. 63--Financing section of the CF Statement)

13. INTEL’s current ratio and working capital as of 12/30/2017
(Fig. in Mlns.)	12/30/2017
Current assets	29500
Current Liabilities	17421
Current ratio=Current assets/Currnet Liabilities
29500/17421=	1.69
Working capital=Current assets-Current Liabilities
29500-17421=
12079