Accounting for Joint Ventures Starbucks Corporation and Peps

Accounting for Joint Ventures Starbucks Corporation and PepsiCo formed a joint venture to produce and distribute Starbucks\' bottled Frappuccino coffee drink throughout North America. Assume that the 50/50 joint venture had a book value on the consolidated balance sheet of Starbucks Corporation of $90 million and $70 million at year-end 2012 and 2011, respectively. Further, assume that on Starbucks\' 2012 statement of cash flow, the company disclosed an adjustment to net income for the PepsiCo joint venture as follows: 2012 Equity in income of joint venture $(22,000,000) Calculate the joint venture\'s total earnings and total cash dividends for 2012. Total 2012 earnings Total 2012 cash dividends$ 0 Check

Solution

In cash flow statement, during the calculation of operating cashflows, we would deduct equity in income of associates or joint ventures to arrive at operating cash flows.

Therefore, Starbucks\' share of Net Income from Joint Venture in 2012 is $22,000,000, which is 50% share.

Total 2012 earnings -= $44,000,000

Total 2012 cash dividends = Beginning Capital + Net Income - Ending Capital

= $70,000,000 + $44,000,000 - $90,000,000

=$24,000,000

Therefore, Total 2012 earnings = $44,000,000; Total 2012 cash dividends = $24,000,000