E8.8. Reformulation of an Equity Statement and Accounting for the Exercise of Stock Options: Starbucks Corporation (Hard) The statement of shareholders' equity below for Starbucks Corporation, the retail coffee vendor, is for fiscal year 2007.

Additional Other Additional Accumulated Other (5 in thousands) Common Stock Shares Amount Paid-in Paid-In Retained Comprehensive Capital Capital Earings Income (Loss) Total Balance, October 1, 2006 756,602,071 $756 5 $39.393 $2.151,084 $37.273 $2,228,506 Net earnings 672,638 572,638 Unrealized holding loss. net (20.380) (20,380) Translation adjustment. net of tax Comprehensive income Stock-based compensation experse 37,727 37.727 689,989 106,373 106,373 Exercise of stock options, including tex benefit of $95,276 12,744,226 13 225,233 Sale of common stock. including tax provision of $139 1,908,407 2 46,826 32.969,419) (33) (378,432) 2007 738,285,285 $738 $ 0 Repurchase of common stock Balance September 30, (634,356) 225,246 46,828 (1,012,821) $39,393 $2,189,366 $54,620 $2,284,117

a. Reformulate the statement to distinguish comprehensive income from transactions with shareholders

b. Calculate the after-tax loss to shareholders from the exercise of stock options during the year. The following information is provided in the equity footnote in the firm's 10-K for 2007: Weighted Weighted Average Average Shares Subject to Exercise Remaining Price Contractual Options per Share Life (Years) Outstanding, October 3, 2006 65419,871 1683 6.2 Granted 12,298,465 3604 Exercised (12,744 226) 1023 Cancelledforfeited (3,458,007) 30.92 Outstanding, September 30, 2007 65,516,103 20.97 Exercisable, September 30, 2007 40,438,082 14.05 5.0 Vested and expected to vest. September 30, 2007 53,681,867 20.60 62 At balance sheet date in 2007, Starbucks' shares traded at $28.57 each. Provide an estimate of the option overhang at that date. Real World Connection Material on Starbucks can be found in Exercises E9.9, E11.9, E12.8, and E14.10.