Discuss accrual vs. cash accounting methods. What are they, why use one over another? What do most large business use? How are expenses and revenues defined under each method?

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Irving HeathcoteLv2

20 Jul 2019

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Download Starbucks 10K for fiscal year 2013 (that is, the year ended September 29, 2013).

a. Review the revenue recognition policies of Starbucks discussed in Note 1 (Summary of Significant Accounting Policies). Does Starbucks record revenue when they receive cash from their customers (cash-basis accounting) or do they follow a different rubric (for example, accrual accounting)? How does Starbucks record revenue on stored value cards (i.e., gift cards)? What challenges in measuring revenue do you observe? That is, are there any significant judgments management needs to make in recording sales revenues at Starbucks?

b. What are Starbucks' major expenses?

c. Were there any significant changes in the cost structure during the most recent year?

d. In fiscal 2013, Starbucks separately reported a litigation charge included it in operating income. Why didn't the company just include this amount within the line item for general and administrative expenses? Why is it an operating expense?

e. Was the company profitable during 2013? During 2012? Explain your definition of âprofitableâ.

f. Refer to Starbucksâ fiscal 2013 statement of cash flows:

a. Compare Starbucksâ net earnings to cash provided by operating activities and explain the difference.

b. How much cash did Starbucks use for expenditures for property, plant and equipment during fiscal 2013?

c. What amount of dividends did Starbucks pay during the year? How does this amount compare to the amount of dividends declared as shown in the statement of equity? g. Several notes to the financial statements refer to the use of âestimates.â Which accounts on Starbucksâ balance sheet require estimates? Are any accounts estimate free?

skyweasel580

Financial Accounting.â¨1. Answer T (true) or F (false) for each of the following statements

1. Revenue is a measure of expected inflow cash from selling goods and providing services.

2. Expenses are a measure of expected outflow of cash consumed, in the process of generating revenues.

3. Dividends represent distributions of earnings and decrease ownersâ equity.

4. Depreciation expense reflects used/consumption of fixed assets.

5. Depreciation associated with land is dependent on the life and eventual use of the land

6. Assets = Liabilities + Contributed Capital + Retained Earnings

7. Under the accrual basis of accounting, revenue is recognized in the period when the cash is received as opposed to when the patient service is made.

Textbook healthcare finance 6th edition L Gapenski & K Reiter (2016)

raspberrybeaver682

Tubby Toys estimates that its new line of rubber ducks will generate sales of $6.90 million, operating costs of $3.90 million, and a depreciation expense of $.90 million. Assume the tax rate is 30%.

a.	Calculate the operating cash flow for the year by using all three methods: (a) adjusted accounting profits; (b) cash inflow/cash outflow analysis; and (c) the depreciation tax shield approach. (Enter your answers in millions rounded to 2 decimal places.)

Method	Cash Flow
Adjusted accounting profits	$ million
Cash inflow/cash outflow analysis	million
Depreciation tax shield approach	million

Are the above answers equal?

	Yes

Revenues generated by a new fad product are forecast as follows:

Year	Revenues
1	$50,000
2	40,000
3	20,000
4	10,000
Thereafter	0

Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $40,000 in plant and equipment.

a.	What is the initial investment in the product? Remember working capital.

Initial investment

If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firmâs tax rate is 30%, what are the project cash flows in each year? Assume the plant and equipment are worthless at the end of 4 years. (Do not round intermediate calculations.)

Year	Cash Flow
1	$
2
3
4

c.	If the opportunity cost of capital is 12%, what is the project's NPV? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

NPV