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in.wbn.ins 030 Recording depreciation and amortization entry and identifying its
financial-statement effects (Starbucks)
This exercise has you record a single “outsider” entry that summarizes the depreciation
and amortization entries Starbucks recorded during the year ended June 30, 2012 and
identify financial-statement effects for a related “insider” entry. Starbucks’s financial statements are on pages 4-7. Use accounts from the chart on page 3 to record the entry in Part I.
Assumptions and Background
■ While Starbucks is not a manufacturing company, based on its disclosures, we
suspect it does have some production activities. These are likely associated with
roasting coffee beans and perhaps other activities.
■ Starbucks (like many US GAAP companies doesn’t disclose depreciation and
amortization separately. Accordingly, to allow you to record the outsider entry
in Part I, we have included a single account for accumulated depreciation and
amortization, which is contra to fixed assets.
■ While you can’t record depreciation and amortization separately as an outsider
in Part I, you can determine the financial-statement effects of related “insider”
entries, and will be asked to do so in Part II.
Part I: Record outsiders’ depreciation and amortization entry
Required
(a) Record a single entry that summarizes the depreciation and amortization entries
Starbucks recorded during the year ended June 30, 2012 to recognize usage of PP&E
and intangible assets.
Starbucks' production-related and non-productionrelated depreciation and amortization
Debit
Credit
Part II: Financial-Statement Effects of insiders’ entries
Required
For insiders’ depreciation and amortization entries summarized by the entry you recorded in Part I, complete the related table identifying the Starbucks’ financial-statement line
items that would have been directly affected (and the direction of the effects) for the year
ended June 30, 2012.
Choose the most appropriate line items on Intel’s financial statements.
You may customize this work, as long as you credit G. Peter & Carolyn R. Wilson and respect the Creative Commons
Attribution-Noncommercial-Share Alike United States license. © 1991–2013 NavAcc LLC.
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Record Keeping
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2
NAVIGATING ACCOUNTING®
Guidance:
(1) Determine the appropriate line item(s) affected using Starbucks’ financial statements on pages 4-7. For example, write “cash and cash equivalents” rather than
“cash” because this is on Intel’s balance sheet.
(2) Include line item(s) directly affected, including the effect(s) of closing entries for
events affecting income. Ignore taxes.
(3) Don’t include totals or sub-totals indirectly affected by the entry. For example,
don’t report “net income” on the income statement. However, net income is
NOT a total on the statement of shareholders’ equity.
(4) Three or four lines were included below for each statement, but you may need
none or more than one line. Write “NONE” if no line item is effected on the
statement.
(5) Indicate if the effect(s) of the entries associated with the event increased or
decreased the line item. Put an X in the appropriate column if the above event
increases or decreases that line item. Be sure to mark only one box in each
statement’s row. NOTE: If a reported negative number changes from -2 to -3, it
decreases; if it changes from - 2 to - 1, it increases.
(b) Insiders’ depreciation and amortization:
Starbucks' production-related and non-production-related depreciation and amortization
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF EARNINGS
Line Items
Increases
Decreases
Line Items
Increases
Decreases
CONSOLIDATED STATEMENTS OF EQUITY
Line Items
Increases
Decreases
STATEMENT OF CASH FLOWS
Line Items
Increases
Decreases
© 1991-2013 NavAcc LLC, G. Peter & Carolyn R. Wilson
3
EXERCISE
CHART OF ACCOUNTS
ASSETS
Current
AR
C
Inven
PrEx
Accounts receivable
Accounts receivable, gross
ARG
Allowance for bad debts
Allbd
Cash and cash equivalents
Inventories
Materials inventories
Minv
Work in process
WIP
Finished goods inventories
FGI
Segregated inventories: deferred revenue
SIdr
Prepaid expenses
Non-current
Fixed
Fixed assets
Fixed assets (historical cost)
FAhc
Accumulated depreciation and amortization
AcDA
LIABILITIES
Current
AP
AcrL
DivP
Drev
Accounts payable
Accrued liabilities
Dividend payable
Deferred revenue
Non-current
LTD
Long-term debt
OWNERS' EQUITY
Permanent
RE
SCap
Retained earnings
Share capital
Net income
CGS
DAEx
G/L
IncS
Rev
SGA
Cost of goods sold
Depreciation and amortization expense
Gain/loss
PPEGL Gain/Loss on PP&E disposals
Income summary
Revenues, net
Selling, general, and administrative expense
© 1991-2013 NavAcc LLC, G. Peter & Carolyn R. Wilson
4
NAVIGATING ACCOUNTING®
STARBUCKS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventories
Prepaid expenses and other current assets
Deferred income taxes, net
Total current assets
Long-term investments available-for-sale securities
Equity and cost investments
Property, plant and equipment, net
Other assets
Goodwill
TOTAL ASSETS
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
Accrued liabilities
Insurance reserves
Deferred revenue
Total current liabilities
Long-term debt
Other long-term liabilities
Total liabilities
Shareholders equity:
Common stock ($0.001 par value) authorized, 1,200.0 shares; issued and outstanding,
749.3 and 744.8 shares, respectively (includes 3.4 common stock units in both periods)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
Total shareholders equity
Noncontrolling interests
Total equity
TOTAL LIABILITIES AND EQUITY
Sep 30,
2012
Oct 2,
2011
$1,188.6
848.4
485.9
1,241.5
196.5
238.7
4,199.6
116.0
459.9
2,658.9
385.7
399.1
$8,219.2
$1,148.1
902.6
386.5
965.8
161.5
230.4
3,794.9
107.0
372.3
2,355.0
409.6
321.6
$7,360.4
$398.1
1,133.8
167.7
510.2
2,209.8
549.6
345.3
3,104.7
$540.0
940.9
145.6
449.3
2,075.8
549.5
347.8
2,973.1
0.7
39.4
5,046.2
22.7
5,109.0
5.5
5,114.5
$8,219.2
0.7
40.5
4,297.4
46.3
4,384.9
2.4
4,387.3
$7,360.4
Starbucks fiscal 2012 10K, sec.gov
© 1991-2013 NavAcc LLC, G. Peter & Carolyn R. Wilson
5
EXERCISE
STARBUCKS CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
(in millions, except per share data)
Fiscal Year Ended
Net revenues:
Company-operated stores
Licensed stores
CPG, foodservice and other
Total net revenues
Cost of sales including occupancy costs
Store operating expenses
Other operating expenses
Depreciation and amortization expenses
General and administrative expenses
Restructuring charges
Total operating expenses
Gain on sale of properties
Income from equity investees
Operating income
Interest income and other, net
Interest expense
Earnings before income taxes
Income taxes
Net earnings including noncontrolling interests
Net earnings (loss) attributable to noncontrolling
Net earnings attributable to Starbucks
Earnings per share basic
Earnings per share diluted
Weighted average shares outstanding:
Basic
Diluted
Cash dividends declared per share
Sep 30,
2012
Oct 2,
2011
Oct 3,
2010
$10,534.5
1,210.3
1,554.7
13,299.5
5,813.3
3,918.1
429.9
550.3
801.2
$9,632.4
1,007.5
1,060.5
11,700.4
4,915.5
3,594.9
392.8
523.3
749.3
11,512.8
10,175.8
30.2
173.7
1,728.5
115.9
(33.3)
1,811.1
563.1
1,248.0
2.3
$1,245.7
$1.7
$1.6
$8,963.5
875.2
868.7
10,707.4
4,416.5
3,471.9
279.7
510.4
704.6
53.0
9,436.1
210.7
1,997.4
94.4
(32.7)
2,059.1
674.4
1,384.7
0.9
$1,383.8
$1.8
$1.8
754.4
773.0
$0.7
748.3
769.7
$0.6
148.1
1,419.4
50.3
(32.7)
1,437.0
488.7
948.3
2.7
$945.6
$1.3
$1.2
744.4
764.2
$0.4
Starbucks fiscal 2012 10K, sec.gov
© 1991-2013 NavAcc LLC, G. Peter & Carolyn R. Wilson
6
NAVIGATING ACCOUNTING®
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
(in millions)
Balance, September 27, 2009
Net earnings
Unrealized holding loss, net
Translation adjustment, net of tax
Comprehensive income
Stock-based compensation expense
Exercise of stock options, including tax benefit of $27.7
Sale of common stock, including tax benefit of $0.1
Repurchase of common stock
Net distributions to noncontrolling interests
Cash dividend
Purchase of noncontrolling interests
Balance, October 3, 2010
Net earnings
Unrealized holding loss, net
Translation adjustment, net of tax
Comprehensive income
Stock-based compensation expense
Exercise of stock options, including tax benefit of $96.1
Sale of common stock, including tax benefit of $0.1
Repurchase of common stock
Cash dividend
Purchase of noncontrolling interests
Balance, October 2, 2011
Net earnings
Unrealized holding loss, net
Translation adjustment, net of tax
Comprehensive income
Stock-based compensation expense
Exercise of stock options, including tax benefit of $167.3
Sale of common stock, including tax benefit of $0.2
Repurchase of common stock
Cash dividend
Non-controlling interest resulting from acquisition
Balance, September 30, 2012
Common Stock
Shares
Amount
742.9
$0.7
$0.7
(26.8)
$145.6
17.3
0.5
(15.6)
147.2
312.5
19.1
(555.9)
744.8
(28.0)
$40.5
$0.7
155.2
326.1
19.5
(501.9)
16.5
0.3
(12.3)
749.3
Retained
Earnings
$2,793.2
945.6
(17.0)
8.8
115.6
137.5
18.5
(285.6)
10.1
0.8
(11.2)
742.6
Additional Paidin Capital
$186.4
Accumulated
Other
Comprehensive
Income/(Loss)
$65.4
$0.7
$39.4
(267.6)
$3,471.2
1,245.7
$57.2
(4.4)
(6.5)
(419.5)
$4,297.4
1,383.8
$46.3
(26.4)
2.8
(91.3)
(543.7)
$5,046.2
$22.7
Shareholders
Equity
$3,045.7
945.6
(17.0)
8.8
937.4
115.6
137.5
18.5
(285.6)
(267.6)
(26.8)
$3,674.7
1,245.7
(4.4)
(6.5)
1,234.8
147.2
312.5
19.1
(555.9)
(419.5)
(28.0)
$4,384.9
1,383.8
(26.4)
2.8
1,360.2
155.2
326.1
19.5
(593.2)
(543.7)
$5,109.0
Noncontrolling
Interest
$11.2
2.7
2.7
(0.8)
(5.5)
$7.6
2.3
2.3
(7.5)
$2.4
0.9
0.9
2.2
$5.5
Total
$3,056.9
948.3
(17.0)
8.8
940.1
115.6
137.5
18.5
(285.6)
(0.8)
(267.6)
(32.3)
$3,682.3
1,248.0
(4.4)
(6.5)
1,237.1
147.2
312.5
19.1
(555.9)
(419.5)
(35.5)
$4,387.3
1,384.7
(26.4)
2.8
1,361.1
155.2
326.1
19.5
(593.2)
(543.7)
2.2
$5,114.5
Starbucks fiscal 2012 10K, sec.gov
© 1991-2013 NavAcc LLC, G. Peter & Carolyn R. Wilson
7
EXERCISE
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Fiscal Year Ended
OPERATING ACTIVITIES:
Net earnings including noncontrolling interests
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
Gain on sale of properties
Deferred income taxes, net
Income earned from equity method investees, net of distributions
Gain resulting from acquisition of joint ventures
Stock-based compensation
Other
Cash provided/(used) by changes in operating assets and liabilities:
Accounts receivable
Inventories
Accounts payable
Accrued liabilities and insurance reserves
Deferred revenue
Prepaid expenses, other current assets and other assets
Net cash provided by operating activities
INVESTING ACTIVITIES:
Purchase of investments
Maturities and calls of investments
Acquisitions, net of cash acquired
Additions to property, plant and equipment
Cash proceeds from sale of property, plant, and equipment
Other
Net cash used by investing activities
FINANCING ACTIVITIES:
(Payments)/proceeds from short-term borrowings
Purchase of noncontrolling interest
Proceeds from issuance of common stock
Excess tax benefit from exercise of stock options
Cash dividends paid
Repurchase of common stock
Minimum tax withholdings on share-based awards
Other
Net cash used by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
CASH AND CASH EQUIVALENTS:
Beginning of period
End of period
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of capitalized interest
Income taxes
Sep 30,
2012
Oct 2,
2011
$1,384.7
$1,248.0
580.6
61.1
(49.3)
153.6
23.6
550.0
(30.2)
106.2
(32.9)
(55.2)
145.2
33.3
Oct 3,
2010
$948.3
540.8
(42.0)
(17.2)
(23.1)
113.6
75.5
(90.3)
(273.3)
(105.2)
23.7
60.8
(19.7)
1,750.3
(88.7)
(422.3)
227.5
(81.8)
35.8
(22.5)
1,612.4
(33.4)
123.2
(3.6)
(18.7)
24.2
17.3
1,704.9
(1,748.6)
1,796.4
(129.1)
(856.2)
5.3
(41.8)
(974.0)
(966.0)
430.0
(55.8)
(531.9)
117.4
(13.2)
(1,019.5)
(549.0)
209.9
(12.0)
(445.8)
5.1
2.3
(789.5)
(30.8)
30.8
(27.5)
250.4
103.9
(389.5)
(555.9)
(15.0)
(5.2)
(608.0)
(0.8)
(15.9)
(45.8)
132.8
36.9
(171.0)
(285.6)
(4.9)
(8.4)
(346.0)
(5.2)
564.2
236.6
169.8
(513.0)
(549.1)
(58.5)
(0.5)
(745.5)
9.7
40.5
1,148.1
1,188.6
1,164.0
1,148.1
599.8
1,164.0
34.4
416.9
34.4
350.1
32.0
527.0
Starbucks fiscal 2012 10K, sec.gov
© 1991-2013 NavAcc LLC, G. Peter & Carolyn R. Wilson