During 2009, Starbucks purchased fixed assets costing approximately $450 million. Assume that the company purchased the assets at the beginning of the year, uses straight-line depreciation, and normally depreciates its equipment over three years.

a. Compute the book value of the equipment at the end of each of the three years.

b. Complete a chart like the following

2009 2010 2011 Total

Depreciation expense

Cash outflow associated with the

Purchase of the equipment

c. What is the purpose of the adjustment at the end of each period?