Accounting, Find attached.
sildg_99a
sw10.pdf
BUSN 5021: Financial Accounting 1
TRU Open Learning
BUSN 5021, Module 10, Supplementary Worksheet Problems
Problem 1 Panda Inc.’s 10‐K report contains the following footnote relating to its leasing activities:
At December 31, 2013, the company was committed to non‐cancellable leases with remaining
terms of one to 15 years. A summary of operating lease commitments under non‐cancellable leases
follows:
Fiscal Operating
Year Leases
2014 $ 250,000
2015 300,000
2016 275,000
2017 225,000
2018 200,000
Thereafter 800,000
Required
a.) What is the value of lease assets and liabilities reported on the company’s balance sheet?
b.) Assuming a 5% discount rate, estimate the amount of assets and liabilities that the company avoids reporting by using off‐balance‐sheet financing.
c.) What adjustments would you consider making to the company’s income statement?
d.) How would including the assets and liabilities affect the following ratios:
i. Return on Equity
ii. Net operating profit after tax
iii. Debt to Equity
2 Module 10 Supplementary Worksheet
TRU Open Learning
Problem 2 Giraffe Inc.’s 10‐K report contains the following footnote relating to its leasing activities:
At March 31, 2013, the company was committed to non‐cancellable leases with remaining terms of
one to 10 years. A summary of operating lease commitments under non‐cancellable leases follows
(in thousands):
Fiscal Operating
Year Leases
2014 $ 185
2015 200
2016 195
2017 190
2018 210
Thereafter 630
Required
a.) Assuming a 9% discount rate, estimate the amount of assets and liabilities that the company avoids reporting by using off‐balance‐sheet financing.
b.) What adjustments would you consider making to the company’s income statement?
c.) How would including the assets and liabilities affect the following ratios:
i. Return on Equity
ii. Net operating profit after tax
iii. Debt to Equity ratio
BUSN 5021: Financial Accounting 3
TRU Open Learning
Problem 3 Airco’s 10‐K report reveals the following leasing footnote:
The minimum future lease payments under our capital and operating leases were as follows (in
thousands):
Fiscal Capital Operating
Year Leases Leases
2014 $25 $ 700
2015 30 600
2016 20 550
2017 15 600
2018 10 650
Thereafter 30 1,950
Subtotal 130 $4,900
Less: imputed interest (20)
Present value $110
Required
a.) What is the balance of lease liabilities reported on the company’s balance sheet?
b.) Compute the implicit discount rate used by the company for its capital leases.
c.) Estimate the amount of assets and liabilities that the company avoids reporting by using off‐balance‐sheet financing.
d.) What adjustments would you consider making to the company’s income statement?
e.) How would including the assets and liabilities affect the following ratios:
i. Return on Equity
ii. Net operating profit after tax
iii. Debt to Equity ratio
4 Module 10 Supplementary Worksheet
TRU Open Learning
Problem 4 Groundco.’s 10‐K report reveals the following leasing footnote:
The minimum future lease payments under our capital and operating leases were as follows:
Fiscal Capital Operating
Year Leases Leases
2014 $5,000 $ 38,000
2015 3,000 42,000
2016 2,500 34,000
2017 2,700 51,000
2018 2,300 33,000
Thereafter 4,600 132,000
Subtotal 20,100 $320,000
Less: imputed interest (5,000)
Present value $15,100
Required
a.) What is the balance of lease liabilities reported on the company’s balance sheet?
b.) Compute the implicit discount rate used by the company for its capital leases.
c.) Estimate the amount of assets and liabilities that the company avoids reporting by using off‐balance‐sheet financing.
d.) What adjustments would you consider making to the company’s income statement?
e.) How would including the assets and liabilities effect the following ratios:
i. Return on Equity
ii. Net operating profit after tax
iii. Debt to Equity ratio
