The purpose of this assignment is to help you understand how the inventories, property, plant, and equipment (PP&E), and intangible assets concepts discussed in Chapters 8-11 of the textbook apply in a real-world company. To complete this assignment, you will need to use Starbucks 2019 Annual Report (available on Canvas).
Prepare type-written responses to the following questions. Include appropriate references to the Annual Report. The assignment will be graded on correctness and presentation. Hand-written work will not be accepted and late assignments will have five points automatically deducted. The assignment can be completed as an individual or with a partner (submit one assignment per partnership).
- Is Starbucks inventory increasing or decreasing? Is this good or bad for Starbucks? Why? (3 points)
- In what line item(s) on Starbucks 2019 consolidated statement of earnings does depreciation expense appear? (2 points)
- Starbucks recognized goodwill impairments in fiscal years 2017, 2018, and 2019. What was the amount of the goodwill impairments in fiscal years 2017 and 2018 and what were the major causes of these impairments? (4 points)
- What summary journal entry did Starbucks make to record amortization expense for finite-lived intangible assets during fiscal 2019? What is Starbucks most significant finite-lived intangible asset? How was that intangible asset acquired? (5 points)
- Starbucks records asset retirement obligations (ARO) for leasehold improvements that they are contractually obligated to remove at the end of the lease. What summary journal entries did Starbucks make to record changes to the ARO asset (included in property, plant, and equipment) and the ARO liability (included in other long-term liabilities) in fiscal 2019? Assume that no AROs were settled during fiscal 2019 and that the only new ARO liability was recognized on September 29, 2019 for $8.0M. (6 points)
STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (in millions, except per share data) Sep 29, 2019 Sep 30, 2018 2017 $ $ $ Fiscal Year Ended Net revenues: Company-operated stores Licensed stores Other Total net revenues Cost of sales Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Restructuring and impairments Total operating expenses Income from equity investees Operating income Gain resulting from acquisition of joint venture Net gain resulting from divestiture of certain operations Interest income and other, net Interest expense Earnings before income taxes Income tax expense 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 Weighted average shares outstanding: Basic Diluted 21,544.4 2,875.0 2.089.2 26,508.6 8,526.9 10,493.6 371.0 1,377.3 1,824.1 135.8 22,728.7 298.0 4,077.9 19,690.3 2,652.2 2,377.0 24.719.5 7,930.7 9,472.2 554.9 1,247.0 1,708,2 224.4 21,137.4 301.2 3,883.3 1,376.4 499.2 191.4 (170.3) 5,780.0 1,262.0 4,518.0 (0.3) 4,518.3 3.27 3.24 17,650.7 2,355.0 2,381.1 22,386.8 7,065.8 8,486.4 518.0 1,011.4 1,408.4 153.5 18,643.5 391.4 4,134.7 - 93.5 181.8 (92.5) 4,317.5 1.432.6 2,884.9 622.8 96.5 (331.0) 4,466.2 871.6 3,594.6 (4.6) 3,599.2 2.95 2.92 0.2 $ $ $ $ S $ $ S S 2,884.7 1.99 1.97 827 1,221.2 1,233.2 1,382.7 1,394.6 1,449.5 1,461.5 See Notes to Consolidated Financial Statements. CONSOLIDATED BALANCE SHEETS (in millions, except per share data) Sep 30, 2018 $ 2,686.6 70.5 879.2 1,529.4 488.2 5,653.9 220.0 396.0 6,431.7 1,765.8 479.6 781.8 3.490.8 19,219.6 8,756.3 181.5 693.1 1,400.5 1,462.8 12,494.2 267.7 334.7 5,929.1 134.7 412.2 1,042.2 3,541.6 24,156.4 $ S ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other current assets Total current assets Long-term investments Equity investments Property, plant and equipment, net Deferred income taxes, net Other long-term assets Other intangible assets Goodwill TOTAL ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) Current liabilities: Accounts payable Accrued liabilities Accrued payroll and benefits Income taxes payable Stored value card liability and current portion of deferred revenue Current portion of long-term debt Total current liabilities Long-term debt Deferred revenue Other long-term liabilities Total liabilities Shareholders' equity/(deficit): Common stock (S0.001 par value) authorized, 2,400.0 shares; issued and outstanding, 1,184.6 and 1,309.1 shares, respectively Additional paid-in capital Retained earnings/(deficit) Accumulated other comprehensive loss Total shareholders' equity/(deficit) Noncontrolling interests Total equity/(deficit) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) 1,189.7 1,753.7 664.6 1,291.7 1,269.0 1,179.3 1,752.5 656.8 102.8 1,642.9 349.9 5,684.2 9,090.2 6,775.7 1,430.5 22,980.6 6.168.7 11,167.0 6,744.4 1,370.5 25,450.6 1.2 41.1 (5,771.2) (503.3) (6,232.2) 1.2 (6,231.0) 19,219.6 1.3 41.1 1,457.4 (330.3) 1,169.5 6.3 $ 1,175.8 24,156.4 STARBUCKS CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (in millions, except per share data) Sep 29, 2019 Sep 30, 2018 2017 $ $ $ Fiscal Year Ended Net revenues: Company-operated stores Licensed stores Other Total net revenues Cost of sales Store operating expenses Other operating expenses Depreciation and amortization expenses General and administrative expenses Restructuring and impairments Total operating expenses Income from equity investees Operating income Gain resulting from acquisition of joint venture Net gain resulting from divestiture of certain operations Interest income and other, net Interest expense Earnings before income taxes Income tax expense 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 Weighted average shares outstanding: Basic Diluted 21,544.4 2,875.0 2.089.2 26,508.6 8,526.9 10,493.6 371.0 1,377.3 1,824.1 135.8 22,728.7 298.0 4,077.9 19,690.3 2,652.2 2,377.0 24.719.5 7,930.7 9,472.2 554.9 1,247.0 1,708,2 224.4 21,137.4 301.2 3,883.3 1,376.4 499.2 191.4 (170.3) 5,780.0 1,262.0 4,518.0 (0.3) 4,518.3 3.27 3.24 17,650.7 2,355.0 2,381.1 22,386.8 7,065.8 8,486.4 518.0 1,011.4 1,408.4 153.5 18,643.5 391.4 4,134.7 - 93.5 181.8 (92.5) 4,317.5 1.432.6 2,884.9 622.8 96.5 (331.0) 4,466.2 871.6 3,594.6 (4.6) 3,599.2 2.95 2.92 0.2 $ $ $ $ S $ $ S S 2,884.7 1.99 1.97 827 1,221.2 1,233.2 1,382.7 1,394.6 1,449.5 1,461.5 See Notes to Consolidated Financial Statements. CONSOLIDATED BALANCE SHEETS (in millions, except per share data) Sep 30, 2018 $ 2,686.6 70.5 879.2 1,529.4 488.2 5,653.9 220.0 396.0 6,431.7 1,765.8 479.6 781.8 3.490.8 19,219.6 8,756.3 181.5 693.1 1,400.5 1,462.8 12,494.2 267.7 334.7 5,929.1 134.7 412.2 1,042.2 3,541.6 24,156.4 $ S ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other current assets Total current assets Long-term investments Equity investments Property, plant and equipment, net Deferred income taxes, net Other long-term assets Other intangible assets Goodwill TOTAL ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) Current liabilities: Accounts payable Accrued liabilities Accrued payroll and benefits Income taxes payable Stored value card liability and current portion of deferred revenue Current portion of long-term debt Total current liabilities Long-term debt Deferred revenue Other long-term liabilities Total liabilities Shareholders' equity/(deficit): Common stock (S0.001 par value) authorized, 2,400.0 shares; issued and outstanding, 1,184.6 and 1,309.1 shares, respectively Additional paid-in capital Retained earnings/(deficit) Accumulated other comprehensive loss Total shareholders' equity/(deficit) Noncontrolling interests Total equity/(deficit) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) 1,189.7 1,753.7 664.6 1,291.7 1,269.0 1,179.3 1,752.5 656.8 102.8 1,642.9 349.9 5,684.2 9,090.2 6,775.7 1,430.5 22,980.6 6.168.7 11,167.0 6,744.4 1,370.5 25,450.6 1.2 41.1 (5,771.2) (503.3) (6,232.2) 1.2 (6,231.0) 19,219.6 1.3 41.1 1,457.4 (330.3) 1,169.5 6.3 $ 1,175.8 24,156.4
