Concept explainers
Analysis Case 15–4
Lease concepts; Walmart
• LO15–1 through LO15–4
Real World Financials
Walmart Stores, Inc. is the world’s largest retailer. A large portion of the premises that the company occupies are leased. Its financial statements and disclosure notes revealed the following information:
Balance Sheet
($ in millions)
2016 | 2015 | |
Assets | ||
Property: | ||
Property under capital lease | $11,096 | $5,239 |
Less: Accumulated amortization | (4,751) | (2,864) |
Liabilities | ||
Current liabilities: | ||
Obligations under finance leases due within one year | 551 | 287 |
Long-term debt: | ||
Long-term obligations under finance leases | 5,816 | 2,606 |
Required:
1. Discuss some possible reasons why Walmart leases rather than purchases most of its premises.
2. The net asset “property under finance lease” has a 2016 balance of $6,345 million ($11,096 − 4,751). Liabilities for finance leases total $6,367 ($551 + 5,816). Why do the asset and liability amounts differ?
3. Prepare a 2016 summary entry to record Walmart’s lease payments, which were $600 million.
4. What is the approximate average interest rate on Walmart’s finance leases? (Hint: See Req. 3)
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INTERMEDIATE ACCT VOL.2>CUSTOM<
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