How does Apple’s issuance of bonds and buyback of its own stock impact its accounting equation?

In May 2017, Apple Inc., filed a prospectus with the SEC, indicating that it would be issuing another $7 billion in bonds during 2017. (Apple issued $10 billion in bonds in February 2017 in the US and $1 billion in Taiwan.)

With the bond proceeds, Apple will be buying back its own stock. Apple has also indicated that there will be a 10.5 percent dividend increase for its shareholders.

Questions

  1. What journal entry would Apple make when it issues $7 billion in bonds (ignore underwriting fees)?
  2. How are assets, liabilities, and equity impacted by the bond issuance?
  3. On what financial statement is the balance of bonds payable shown? Where is it shown on that financial statement?
  4. What journal entry would Apple make when it purchases its own stock?
  5. How are assets, liabilities, and equity impacted by the stock buyback?
  6. On what financial statement is the balance of treasury stock shown? How is treasury stock shown on that financial statement?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

  • Student handout (pdf) (word) (contains entire blog posting + discussion questions)
  • PowerPoint file (brief article overview + discussion questions)

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

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