Lease Group Homework Problem (1)

Lease Group Homework Problem (1) - operating leases as...

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Lease Group Homework Problem A company reported the following minimum lease payments for its operating leases: Year Amount (in millions) 200 9 $1,050 201 0 $1,030 2011 $1,040 201 2 $1,020 201 3 $1,100 All lease payments are made at the end of the year The implicit interest rate for capital leases is 10% Other Financial statement Information for 12/31/08 Total Noncurrent Liabilities $6,341 Total Shareholder’s Equity $5,621 Total Assets $16,45 5 Required: a Using the 10% interest rate, calculate the present value of the operating lease payments as of 12/31/08. b Make the journal entry that would be required at 12/31/08 to recognize the
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Unformatted text preview: operating leases as capital leases. (Ignore taxes) c Make the journal entry that would be required on 12/31/2010 to account for the operating lease payment assuming the operating leases were being accounted for as capital leases (Note, this is the second year). d Calculate the ratio on long-term debt to shareholder’s equity and the ratio of total liabilities to total assets at 12/31/08 using the reported balance sheet data. Recalculate them assuming the operating leases were being accounted for as capital leases. Comment on the differences. (Ignore taxes)...
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