Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 7

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 8,800 stores in 50 countries. The following is adapted from Starbucks's annual report for the year ended September 30, 2010, and dollars are reported in thousands.

Assume that the following events occurred in the following quarter, which ended December 31, 2010. Dollars are in thousands.
a. Paid $10,000 cash for additional other long-term assets.
b. Issued additional shares of stock for $5,100 in cash.
c. Purchased property, plant, and equipment; paid $11,200 in cash and signed additional long-term loans for $9,500.
d. Sold, at cost, other long-term assets for $6,000 cash.
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 68.
2. Record the transaction effects determined in requirement 1 using journal entries.
3. Summarize the journal entry effects from requirement 2 using T-accounts. Use the September 2010 ending balances (reported above) as the beginning balances for the October-December 2010 quarter.
4. Explain your response to event ( e ).
5. Prepare a classified balance sheet at December 31, 2010.
6. As of December 31, 2010, has the financing for the investment in assets made by Starbucks primarily come from liabilities or stockholders' equity