FINANCIAL ACCOUNTING 9TH
16th Edition
ISBN: 9781308821672
Author: Libby
Publisher: MCG/CREATE
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Textbook Question
Chapter S, Problem 1C
Analyzing Starbucks’s Lease Disclosures
The following questions pertain to Starbucks’s 2012
- 1. Does Starbucks sign mainly operating or capital leases?
- 2. Where does Starbucks disclose its operating leases on its balance sheet?
- 3. Assume a discount rate of 6 percent and that the amount in the “thereafter” row in Starbucks’s foot-note disclosure is equally spread over the years 2018-2022. What is the present value of Starbucks’s operating leases at the end of fiscal 2012?
- 4. What is the impact on Starbucks’s 2012 debt-to-equity ratio of adding the present value of its operating leases to the liability section of its 2012 balance sheet?
- 5. Would making the adjustment in requirement (4) change your opinion about Starbucks’s creditworthiness?
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Students have asked these similar questions
Assume Fortune Brands, Inc., reports the following footnote relating to its leased facilities in its 2016 10-K report.
Future minimum rental payments under noncancelable operating leases as of December 31, 2016 are as follows:
(In millions)
2017..
2018.
2019.
2020.
2021.
Remainder.
Total minimum rental payments..
Compute the present value of these operating leases using a discount rate of 7% and round the remaining lease life to the nearest whole year.
Select one:
O
O
O
$ 45.6
33.5
26.9
20.2
15.7
37.3
$179.2
A. $179.2 million
B. $140.7 million
C. $127.3 million
D. $154.9 million
Southwest Airlines provides scheduled air transportation services in the United States. Like many airlines, Southwest leases many of its planes from Boeing Company. In its long-term debt disclosure note included in the financial statements for the year ended December 31, 2013, the company listed $56 million in lease obligations. The existing leases had an approximate eight-year remaining life and future lease payments average approximately $8 million per year. Required: 1. Determine the effective interest rate the company used to determine the lease liability assuming that lease payments are made at the end of each fiscal year. 2. Repeat requirement 1 assuming that lease payments are made at the beginning of each fiscal year.
In the long-term liabilities section of its balance sheet at December 31, 2016, Welington Company reported a lease obligation of P750,000, net of current portion of P13,636. Payments of P90,000 were made on both January 2, 2017 and January 2, 2018. Welington’s incremental borrowing rate on the date of lease was 11% and the lessor’s implicit rate, which was known to Welington, was 10%. In its December 31, 2018 balance sheet, what amount should Welington report as capital lease obligation, net of current portion?
Round amounts to the nearest peso.
Chapter S Solutions
FINANCIAL ACCOUNTING 9TH
Ch. S - Defining a Lessor Which of the following best...Ch. S - Prob. 2MCQCh. S - Prob. 3MCQCh. S - Prob. 4MCQCh. S - Prob. 5MCQCh. S - Prob. 6MCQCh. S - Prob. 1MECh. S - Prob. 2MECh. S - Prob. 3MECh. S - Prob. 4ME
Ch. S - Prob. 1ECh. S - Prob. 2ECh. S - Prob. 3ECh. S - Prob. 4ECh. S - Calculating a Deferred Tax Liability LOS-5 On...Ch. S - Prob. 6ECh. S - Prob. 7ECh. S - Prob. 8ECh. S - Prob. 9ECh. S - Prob. 10ECh. S - Converting Operating Leases to Capital Leases...Ch. S - Converting Operating Leases to Capital Leases...Ch. S - Computing Effective Tax Rates LOS-4 Below is...Ch. S - Prob. 4PCh. S - Prob. 5PCh. S - Prob. 6PCh. S - Analyzing Starbuckss Lease Disclosures The...Ch. S - Analyzing Disneys Income Tax Disclosures The...
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