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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Analyzing Starbucks’s Cash and Receivables Disclosures

Obtain Starbucks’s 2017 annual report either using the “Investor Relations” portion of its web site (do a Web search for Starbucks investor relations) or go to http*//www.sec.gov and click “Search for company filings” under “Filings and Forms (EDGAR).” '

Required:

  1. 1. (a) What were the cash and cash equivalents at the end of 2017? What does the company classify as cash equivalents? (b) Why are cash and cash equivalents combined into one amount on the balance sheet?
  2. 2. What were the trade accounts receivable (net) at the end of 2017? At the end of 2016?

    Given Starbucks’s large volume of sales, why isn’t the receivables larger?

  3. 3. What amount of its accounts receivable does Starbucks believe is uncollectible?
  4. 4. What method does Starbucks use to estimate its allowance for doubtful accounts? Is this method allowable by GAAP?

1.

To determine

Report the cash and cash equivalents at the end of 2017, state the items that is classified as cash equivalents and explain the reason for which the cash and cash equivalents are combined into one amount on the balance sheet.

Explanation
  • At the end of the year 2017, the “cash and cash equivalents” were $2,462.3 million. According to the “Note 1” of the accompanying notes to consolidated financial statements, each and every highly liquid investment that has maturity period of three months or less during its time of purchase are categorized as cash equivalents...

2.

To determine

State the amount of trade accounts receivable at the end of the year 2017 and 2016.

3.

To determine

State the amount of accounts receivable that is believed to be uncollectible according to Company S.

4.

To determine

Mention the method used by Company S to estimate its allowance for doubtful accounts and explain whether this method is acceptable by GAAP.

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