Problem:
Excerpts from Starbucks Corporation’s tax note from the company’s Form 10-K for the year ended September 30, 2012, follow.
|
($ in millions)
Financial Year Ended
|
Sep. 30. 2012
|
Oct. 2.2011
|
Oct.3,2010
|
|
Current taxes:
|
|
|
|
|
Federal
|
5466.0
|
$344.7
|
5457.5
|
|
State
|
79.9
|
61.2
|
79.6
|
|
Foreign
|
76.8
|
37.3
|
38.3
|
|
Total current taxes
|
622-7
|
443.2
|
575.4
|
|
Deferred taxes:
|
|
|
|
|
Federal
|
49.2
|
111.6
|
(76.0)
|
|
State
|
(0.7)
|
8.3
|
(9.3)
|
|
Foreign
|
3.2
|
0.0
|
(1.4)
|
|
Total deferred taxes
|
51.7
|
119.9
|
(86.7)
|
|
Total provision for income taxes
|
$674.4
|
5563.1
|
5488.7
|
(Continued)
|
Financial War Ended
|
Sop. 30, 2012
|
Oct. 2, 2011
|
Oct. 3. 2010
|
|
Statutory raw
State income taxes, net of federal income tax benefit Benefits and taxis related to foreign operation% Domestic production activity deduction
other,net
Effective tax rate
|
35.0% 23% (3.3)% (0.7196
(0.71%
|
35.0% 23% (3.1)% (ma)s
(2.5)%
|
35.0% 23% (231% 00.9m
(0.11%
|
|
32.8%
|
31.1%
|
34.0%
|
Sep.30, 2012 oct. 2,2011
|
|
Sep.30,2612
|
Oce.2.201
|
|
Deferred tax assets:
|
|
|
|
Property. plant and equipment
|
562.7
|
$46.4
|
|
Accrued occupancy costs
|
72,0
|
55.9
|
|
Accrued compensation and related costs
|
66.9
|
69.6
|
|
Other accrued liabilities
|
15.7
|
27.8
|
|
Asset retirement obligation asset
|
20.1
|
19.0
|
|
Deferred revenue
|
43.7
|
47.8
|
|
Asset impairments
|
38.5
|
60.0
|
|
Tax credits
|
14.6
|
23.0
|
|
Stock basal compensation
|
131.8
|
128.8
|
|
Net operating lasses
|
99.2
|
85.5
|
|
Other
|
80.9
|
58.6
|
|
Total
|
646.1
|
622.4
|
|
Valuation allowance
|
(154.2)
|
(137.4)
|
|
Total deferred tax asset, net of valuation allowance
|
491.9
|
485.0
|
|
Deferred lax liabilities:
|
|
|
|
Property. plant and equipment
|
(89.0)
|
(66.4)
|
|
Intangible assets and goodwill
|
(34.0)
|
(25.2)
|
|
Other
|
(44.8)
|
(18.1)
|
|
Total
|
(167.8)
|
(109.7)
|
|
Net deferred tax asset
|
5324.1
|
5375.3
|
|
Reported as:
|
|
|
|
Current deferred income tax assets
|
5238.7
|
5230.4
|
|
Long-term deferred income tax assets (included in Other assets)
|
97.3
|
156.3
|
|
Current deferred income tax liabilities
(included in Accrued liabilities)
|
(1.3)
|
(4.9)
|
|
Long-term defeated income tax liabilities (included in Other long-term liabilities)
|
(10.6)
|
(63)
|
|
Net deferred tax asset
|
5324.1
|
5375.3
|
Required:
1. Provide a journal entry to record the aggregate income tax expense for the year ended September 30, 2012.
2. What amount of Starbucks’ income tax expense for the year ended September 30, 2012, was deferred? Did this deferral result in an increase in deferred tax liabilities or a decrease in deferred tax assets?
3. Estimate Starbucks’ earnings before taxes in the year ended September 30, 2012.
4. What tax policy or operating decision accounts for the majority of the divergence between Starbucks’ statutory tax rate and effective tax rate?
5. Estimate the amount by which Starbucks’ tax provision was lower in the year ended September 30, 2012, as a result of the domestic production activity deduction.