Question

Record transaction:

In January, SBUX sells coffee totaling $300,000 to customers for cash. (IMPORTANT ASIDE: The customer might use a credit card to make the purchase. Credit companies charge 2-3% processing fee. SBUX would treat the credit card transaction the same as a cash purchase, except that the amount recorded would be the net cash flow, 97-98% of the selling price.)

Transactions to record: Company-owned stores. In January, SBUX sells coffee totaling $300,000 to customers for cash. (Important aside: The customer might use a credit card to make the purchase. Credit companies charge 2- 3% processing fee. SBUX would treat the credit card transaction the same as a cash purchase, except that the amount recorded would be the net cash flow, 97-98% of the selling price.) Date (ifany Cash Noncash given) Asset Assets Balance Sheet Income Statement Contributed Earned Liabilities Capital Revenues Expenses Net Income

Answer 1

We have to record transaction: SBUX sells coffee totaling $300,000 to customers for cash. As per the golden rules of Accounting, Debit what comes in, Credit what goes out (in case of real accounts). In the above transaction SBUX has sold coffee to their customers for cash.

Assumptions: SBUX is dealing in selling coffee. Their primary product is Coffee i.e. they are in business of selling Beverages (Coffee)

Implications of the above transaction- Total Cash value will increase in the balance sheet by $300,000

Total Inventory of the company will decrease by Cost of Goods Sold (COGS of Coffee sold)

There will be change in the total assets of the company as Cash value is increasing by $300,000 and inventory is decreased by COGS (Cost of goods sold).

Total assets will increase if cost of goods sold(COGS) is lower than $300,000 otherwise total assets will decrease if COGS is higher than $300,000

There will be no change in the Liabilities of SBUX. Revenue of SBUX will be increased by $300,000. Net Income of SBUX will depend upon Cost of Goods Sold (COGS) and other expenses incurred in order to make coffee

Net Income of SBUX is determined by Sales Revenue - all expenses incurred

Journal Entry of the above transaction can be recorded as

Date of Transaction (if given)	Particulars	Debit Amount (Dr)	Credit Amount (Cr)
January	Cash (Dr)	$300,000
	To Inventory(coffee)		$300,000

Being $300,000 cash received by SBUX for selling coffee to their customers.

Change/Impact in the Balance Sheet is shown below

Cash Assets	Non-Cash Assets	Liabilities	Contributed Capital	Earned Surplus
Cash will be increased by $300,000	Inventory will decrease by Cost of Goods Sold amount	No change in liabilities of SBUX	No contribution in the capital by above transaction	Earned surplus will be determined by company's profit and dividend policy

Change/Impact in the Income Statement is shown below

Sales Revenue	Expenses	Net Income
Sales revenue will increase by $300,000	Amount incurred during the period	Net income will be determined by subtracting all the expenses incurred from all sources of income received by SBUX

Note* SBUX would treat transaction made through credit card as cash transaction. Since they charge 2-3% of processing fee. We will take 97-98% of $300,000( selling price) while calculation of change/impact in Balance Sheet as well as Income Statement.