A.Leasehold improvements are substantial costs incurred by starbucks to outfit, remodel, and improve leased retail outlets. Why does Starbucks capitalize and amortize leasehold improvements? Dies its policy for determining useful lives in the presence of a lease renewal option yield high-quality accounting numbers? How would starbucks account for the leasehold improvement costs remaining at the end of a lease it had expected to renew but did not?

B. Starbucks has an ARO related to the leasehold improvements. Describe how Starbucks recognizes the ARO initially in the balance sheet. Then describe how Starbucks recognizes changes in the ARO related asset and ARO liability in the income statment over time. How is income affected when Starbucks actually spends cash to return a leased property to its original condition? If Starbucks spends more cash than reflected in the ARO liablity, how will it account for the difference?

turre encies GRA CASE 8.1 Starbucks part I-Accounting Policy presented below are from Note 1 to Starbucks September 30, financial statements in which Starbucks describes accounting olicy for long lived assets Excerpts from Note 1: "Summary of significant Accounting Policies" Property, Plant and Equipment Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation of property, plant and equipment, which includes assets under capital eases is provided on the