EXERCISE 3. 30 Points( 5+5+5+5+5+5) You are being provided with the Financial Statements of the company Starbucks. Use the Balance Sheet Exhibit 3-14, and the Income Statement Exhibit 3-15 of Starbucks to answer the question. EXHIBIT 3-14 Classified Balance Sheet of Starbucks Corporation (Adapted, in millions) Starbucks Corporation Balance Sheet (Adapted) September 30, 2006 (millkom) Assets Cant $ 313 140 224 636 217 1,530 225 199 167 $4,429 $ 341 661 700 1 232 Cash and cash equivales. Short-term investment. Accounts receivable. Inventoria. Prepaid expenses and other current assets. Total current asti. Long term investment. Property, plant, and equipment, net Intangible aus. Other act Total assets. Liabilities and Shareholders' Equity Current liabilities Accounts payable... Accroed expenses payable.. Short-term nots payable. Current portion of long-term Uscared revenue. Total current lublinio. Long term dele. Other long term labilitin Total abilities Shareholders' equity Common stock Retained earnings. Other equity. Total shareholders' equity. Total liabilities and shareholders' equity 1,935 2 263 2,200 2,151 38 2,229 $4,429 EXHIBIT 3-15 Starbucks Corporation Income Statement in Multi-Step Format Starbucks Corporation Income Statement (Adapted) Year Ended September 30, 2006 Millions $7,787 3,179 4,608 Net operating revenues... Cost of sales (Cost of goods sold).. Gross profit. Store operating expenses..... Other operating expenses.. Depreciation and amortization expenses............. General and administrative expens Total operating expenses. 3,808 Income from operations. 800 Other income. 89 Income before income taxes. 889 Income tax expense 325 Net income.. $ 564 a) Compute the Current Ratio for Starbucks. How do you assess the current financial position of the company based on the current ratio b) Compute the Debt Ratio for the company Starbucks. How do you assess the current financial position of the company based on the debt ratio c) If Starbucks issues new stocks and receives cash of $50Millions, this will show in the jounal entry of the company as follows: Cash 50 50 Common Stock $2,688 260 387 473 How this transaction will affect the current and the debt ratios of Starbucks. Calculate the new current and debt ratios of Starbucks. Will this transaction improve the financial situation of Starbucks in terms of financial ratios? a) If Starbucks pays cash a purchase of a building for $20Millions, this will show in its journal entry as follows: 20 Building Cash 20 How does this transaction affect the performance of Starbucks in terms of the current and debt ratios? b) If Starbucks makes a $30 Millions sale on account to a grocery chain, this will show on the journal entry as follows: Account Receivables 30 Sales Revenue 30 How does this transaction affect the performance of Starbucks in terms of the current and debt ratios? Will the situation improve? Explain f) If Starbucks earns interest revenue and collects cash, $40Millions, this will show up in the journal entry as follows: Account Receivables 40 Sales Revenue 40 How will this transaction affect the performance of Starbucks in terms of the current and debt ratios? Will the situation improve? Explain
