Starbucks Corporation reported the following data in its 2018 and 2017 10-K reports. REQUIRED: a. Prepare income

Question:

Starbucks Corporation reported the following data in its 2018 and 2017 10-K reports.


REQUIRED:

a. Prepare income statements for Starbucks for the years ended September 30, 2018, and October1,2017. Use the format illustrated in Exhibit 1.8.

b. Compute Starbucks' return on equity ratio for 2018 and 2017. Starbucks stockholders' equity at October 2, 2016, was $5,890.7 million.

c. Compute Starbucks' debt-to-equity ratio for 2018 and 2017.

d. In 2018, Starbucks reported a lawsuit is in process where plaintiffs allege that Starbucks did not inform customers about the chemical acrylamide in their products (as required by California law). Starbucks did not record a liability (and expense), stating that the loss was possible but not probable. What would Starbucks' ROE have been if it had accrued a $3,700 million litigation liability (and expense)? What effect did this one-time charge have on the company's return on equity ratio?

e. Starbucks disclosed information about the pending litigation in the footnotes 10 its 2017 financial statements (before the case was settled). Discuss the costs and benefits of disclosing this information in its 2017 annual report.


Exhibit 1.8:

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Financial Accounting

ISBN: 9781618533111

6th Edition

Authors: Michelle L. Hanlon, Robert P. Magee, Glenn M. Pfeiffer, Thomas R. Dyckman

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