Analyzing Starbucks’s Lease Disclosures The following questions pertain to Starbucks’s 2012 balance sheet and lease footnote shown below. 1. Does Starbucks sign mainly operating or capital leases? 2. Where does Starbucks disclose its operating leases on its balance sheet? 3. Assume a discount rate of 6 percent and that the amount in the “thereafter” row in Starbucks’s foot-note disclosure is equally spread over the years 2018-2022. What is the present value of Starbucks’s operating leases at the end of fiscal 2012? 4. What is the impact on Starbucks’s 2012 debt-to-equity ratio of adding the present value of its operating leases to the liability section of its 2012 balance sheet? 5. Would making the adjustment in requirement (4) change your opinion about Starbucks’s creditworthiness?

Financial Accounting

9th Edition

ISBN: 9781259222139

Author: Robert Libby, Patricia Libby, Frank Hodge Ch

Publisher: McGraw-Hill Education

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Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

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Chapter S, Problem 1C

Analyzing Starbucks’s Lease Disclosures

The following questions pertain to Starbucks’s 2012 balance sheet and lease footnote shown below.

1. Does Starbucks sign mainly operating or capital leases?
2. Where does Starbucks disclose its operating leases on its balance sheet?
3. Assume a discount rate of 6 percent and that the amount in the “thereafter” row in Starbucks’s foot-note disclosure is equally spread over the years 2018-2022. What is the present value of Starbucks’s operating leases at the end of fiscal 2012?
4. What is the impact on Starbucks’s 2012 debt-to-equity ratio of adding the present value of its operating leases to the liability section of its 2012 balance sheet?
5. Would making the adjustment in requirement (4) change your opinion about Starbucks’s creditworthiness?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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Chapter S, Problem 6P

Chapter S, Problem 2C

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Solution Summary: The author explains the type of lease signed by Corporation S and the financial item used to report operating lease on the balance sheet.

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