Task: Recording Transactions (in a Journal and T-Accounts), Preparing and Interpreting the Balance Sheet
Starbucks is a coffee company—a big coffee company. During a 10-year period, the number of Starbucks locations grew from 165 to over 5,800 stores—an average increase of 43 percent every year. The following is adapted from a recent Starbucks annual report. Starbucks’ year-end is September 30 and dollars are reported in thousands.
Cash $ 174,500 Accounts payable $462,600
Accounts receivable 97,500 Short-term bank loans 74,900
Inventories 263,200 Long-term debt 5,100
Other current assets 312,100 Other long-term liabilities 23,500
Property, plant, and equipment 1,265,800 Contributed capital 930,300
Other long-term assets 179,500 Retained earnings 796,200
Assume that the following events occurred in the following quarter, which ended December 31:
a. Paid $10,400 cash for additional other long-term assets.
b. Issued additional shares of stock for $5,300 in cash.
c. Purchased property, plant, and equipment; paid $11,800 in cash and signed additional longterm loans for $8,900.
d. Sold, at cost, other long-term assets for $3,000 cash.
e. Conducted negotiations to purchase a coffee farm, which is expected to cost $7,400.
Required:
1. Prepare journal entries to record transactions a–e.
2. Create T-accounts for each of the accounts on the balance sheet and enter the balances at the end of September as beginning balances for the October 1–December 31 quarter.
3. Enter the effects of the transactions in T-accounts (including referencing) and determine the December 31 balances.
4. Explain your response to event e.
5. Prepare a classified balance sheet at December 31.
6. As of December 31, has the financing for the investment in assets made by Starbucks primarily come from liabilities or stockholders’ equity?