Question

Starbucks has many fixed assets in its stores. For example, they have various machines to make drinks or cook food. Identify one of those pieces of equipment, conduct internet research to estimate a replacement cost if it were destroyed today, assuming it is January 1st (cost). How many years do you estimate it will be functional and useful to help Starbucks produce revenue (estimated usefule life)? In that time period in the future, how much do you think Starbucks can sell it for (salvage value)? ( If the machine price is 24,550.35)

Once you have the cost of a machine, an estimated useful life and a salvage value, calculate the item’s depreciation expense for its first year. Extrapolate your results over all Starbucks stores and determine the affect on the balance sheet and income statements by comparing if the item were to be depreciated using the straightline verse double-declining balance methods, over the estimated cost, estimated useful life and estimated salvage values you choose. You must show calculations. To answer this question, you may have to conduct research to determine the make/model machines they use. If you can’t figure it out, use a close substitute.

Answer 1