Final answer:
To adjust the Operating Section of the cash flow statement under the indirect method for inventory and other current assets, subtract increases in these accounts from the net income to reflect the cash tied up in these assets for Apple Inc. from 9/29/12 to 9/28/13.
Step-by-step explanation:
In the operating section of the statement of cash flows using the indirect method, adjustments are made to reconcile net income with cash provided by operating activities. For Apple Inc. from 9/29/12 to 9/28/13, the decrease in inventory (from $1,764 million to $791 million) is added back to net income, as it represents a non-cash expense deducted in calculating net income. Conversely, the increase in Other Current Assets (from $16,803 million to $17,874 million) is subtracted, as it indicates a use of cash. These adjustments ensure that the cash flow statement accurately reflects the cash effects of operating activities, providing a clearer picture of Apple's cash generation and utilization related to changes in inventory and other current assets.
Inventory:
The decrease in Inventory from $1,764 million to $791 million represents a source of cash. In the operating section, this decrease is added back to net income. The rationale is that the cost of goods sold (an expense in the income statement) was previously deducted, but since it does not represent an actual cash outflow during the period, it is added back to reconcile net income with cash generated from operating activities.
Adjustment:
Add the decrease in Inventory to net income.
Other Current Assets:
The increase in Other Current Assets from $16,803 million to $17,874 million indicates a use of cash. It suggests that more funds were tied up in current assets, which need to be subtracted to reflect the actual cash generated by operating activities.
Adjustment:
Subtract the increase in Other Current Assets from net income.
These adjustments ensure that the operating section of the cash flow statement accurately portrays the cash inflows and outflows related to changes in Inventory and Other Current Assets during the specified period.