Starbucks is a coffee company a big coffee company. During a 10- year period, the number of Star-bucks locations grew from 165 to over 8,800 stores in 50 countries. The following is adapted from Starbucks's annual report for the year ended September 30, 2013, and dollars are reported in millions.
Assume that the following events occurred in the following quarter, which ended December 31, 2013. Dollars are in millions.
a. Paid $ 1,000 cash for additional intangible assets.
b. Issued additional shares of common stock for $ 10,000 in cash.
c. Purchased equipment; paid $ 4,000 in cash and signed additional long- term loans for $ 9,500.
d. Paid $ 800 cash for salaries and wages owed at September 30.
e. Conducted negotiations to purchase a coffee farm, which is expected to cost $ 8,400.
Required:
1. Analyze transactions (a)-(e) to determine their effects on the accounting equation. Use the format shown in the demonstration case on page 69.
2. Record the transaction effects determined in requirement 1 using journal entries.
3. Using the September 30, 2013, ending balances (reported above) as the beginning balances for the October- December 2013 quarter, summarize the journal entry effects from requirement 2. Use T- accounts if this requirement is being completed manually; if you are using the GL tool in Connect, the journal entries will have been posted automatically to general ledger accounts that are similar in appearance to Exhibit 2.9.
4. Explain your response to event (e).
5. Prepare a classified balance sheet at December 31, 2013.
6. As of December 31, 2013, has the financing for the investment in assets made by Starbucks primarily come from liabilities or stockholders' equity?
7. Calculate Starbucks' current ratio at September 30, 2013, prior to the transactions listed above. (Using the September 30 balances will prevent any errors in your answers to requirements 1-5 from affecting your answer to this requirement.) Based on this calculation and the analysis of Apple's September 30 current ratio in the chapter, indicate which company was in a better position to pay liabilities as they come due in the next year.