a. Given your knowledge of Starbucks key success and risk factors, use the note information presented above to evaluate Starbucks accounting quality.

b. If you believe that Starbucks accounting policy does not yield measurements of assets and liabilities that reflect economic reality and a measurement of net income that is predictive of future earnings, suggest any changes that you would make to assets, liabilities, and earnings to improve accounting quality. (At this point in your learning process, if you do not have specific numerical adjustments to propose, at least describe potential journal entries you would make to change the financial statements, if any, and what information you might need to make those entries.)

c. Evaluate whether your proposed adjustments are necessary for (1) credit analysis, (2) equity valuation, and (3) management evaluate

Exhibit 1.27 Starbucks Corporation Comparative Income Statements (amounts in millions, except per-share data) (Integrative Case 1.1) 30-Sep 2012 2-Oct 2011 3-Oct 2010 27-Sep 2009 Fiscal Year Ended Net revenues: Company-operated retail Specialty: $10,535 $ 9,632 $ 8,964 $8,180 1,008 1,061 Licensing 1,210 1,555 1,222 373 $9,775 875 869 $13,300 $11,700 $10,707 $ 5,813 4,916 4,417 3,472 280 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 3,918 430 550 801 3,595 393 523 749 $4,325 3,425 264 535 453 332 $9,993 705 Total Operating Expenses $11,513 $10,176 $ 9,436 Gain on sale of properties Income from equity investees 174 148 $ 1,997 1,729 1,419 504 Operating Income Interest income and other, net Interest expense 94 (33) (33) $ 2,059 1,811 563 1,248 (33) 1,437 489 $948 (53) $ 456 144 312 Earnings before Income Taxes 674 1,385 Income taxes Net earnings including noncontrolling interests Net earnings (loss) attributable to noncontrolling interests Net Earnings Attributable to Starbucks Earnings per share-basic Earnings per share-diluted Source: Starbucks Corporation, Forms 10-K for the Fiscal Years ended September 30, 2012, and October 2, 2011 1,384 1,246 $ 946 $1.66 $ 1.62 0.43 $ 0.43 $1.83 $1.27 $1.24 Exhibit 1.27 Starbucks Corporation Comparative Income Statements (amounts in millions, except per-share data) (Integrative Case 1.1) 30-Sep 2012 2-Oct 2011 3-Oct 2010 27-Sep 2009 Fiscal Year Ended Net revenues: Company-operated retail Specialty: $10,535 $ 9,632 $ 8,964 $8,180 1,008 1,061 Licensing 1,210 1,555 1,222 373 $9,775 875 869 $13,300 $11,700 $10,707 $ 5,813 4,916 4,417 3,472 280 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 3,918 430 550 801 3,595 393 523 749 $4,325 3,425 264 535 453 332 $9,993 705 Total Operating Expenses $11,513 $10,176 $ 9,436 Gain on sale of properties Income from equity investees 174 148 $ 1,997 1,729 1,419 504 Operating Income Interest income and other, net Interest expense 94 (33) (33) $ 2,059 1,811 563 1,248 (33) 1,437 489 $948 (53) $ 456 144 312 Earnings before Income Taxes 674 1,385 Income taxes Net earnings including noncontrolling interests Net earnings (loss) attributable to noncontrolling interests Net Earnings Attributable to Starbucks Earnings per share-basic Earnings per share-diluted Source: Starbucks Corporation, Forms 10-K for the Fiscal Years ended September 30, 2012, and October 2, 2011 1,384 1,246 $ 946 $1.66 $ 1.62 0.43 $ 0.43 $1.83 $1.27 $1.24