As of its September 28, 2008 fiscal year-end, Starbucks reports short-term investments in trading securities having an amortized cost of $58.2 million and a fair value of $49.5 million. Calculate (and explain) the amounts Starbucks shows in the following financial statement accounts as of September 28, 2008. Assume a 35 percent tax rate.

(i) September 28, 2008 Short-term investmentstrading securities

(ii) 2008 net income effect of the trading securities transactions

(iii) September 28, 2008 retained earnings effect of the trading securities transactions

(iv) 2008 comprehensive income effect of the trading securities transactions

(v) September 28, 2008 accumulated other comprehensive income effect of the trading securities transactions

b. Repeat Requirement 1 assuming that the securities are available for sale instead of trading.

c. Starbucks available-for-sale securities are primarily ARS. The ARS have been shifted from short- to long-term investments due to liquidity problems in the auction market. At September 28, 2008, the securities had an amortized cost of $65.8 million and a fair value of $59.8 million; thus, they are reported at $59.8 million in the balance sheet. What caused the fair value change? Could Starbucks justify a reclassification of the securities to keep fair value changes out of comprehensive income?