Assessment Tool iFrame ) Lease Disclosures; Microsoft [LO15-2, 15-4, 15-8] "You know, we heard in our accounting class today that a few years ago, there were advantages to structuring lease arrangements as operating leases," your study partner said unexpectedly. "Now I'm wondering if that's changing things for companies that lease assets." Not happy with having to suddenly change your train of thought, but now curious, you open a new tab on your laptop and locate the following disclosure note in Microsoft's 2020 financial statements. We have operating and finance leases for datacenters, corporate offices, reasearch and development facilities, retail stores, and certain equipment. Our leases have remaining lease terms of 1 year to 20 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year. The components of lease expense were as follows: ($ in millions) 2020 Year Ended June 30, Operating lease cost Finance lease cost: $ 2,043 2019 $ 1,707 2018 $ 1,585 Amortization of right-of-use assets Interest on lease liabilities $ 611 336 $ 370 247 $ 243 175 Total finance lease cost $ 947 $ 617 $ 418 Supplemental cash flow information related to leases was as follows: ($ in millions) Cash paid for amounts included in the measurements of lease liabillities: Operating cash flows from operating leases Operating cash flows from finance leases Financing cash flows from finance leases Maturities of lease liabilities were as follows: ($ in millions) Operating Leases Finance Leases Year Ended June 30, 2021 $ 1,807 $ 880 2022 1,652 894 2023 1,474 903 2024 1,262 916 2025 1,000 1,236 Thereafter 3,122 7,194 Total leases payments 10,317 (1,030) 12,023 (2,527) $ 9,287 $ 9,496 2020 2019 2018 $ 1,829 336 $ 1,670 247 $ 1,522 175 409 221 144 Leass imputed interest Total Required: 1. What do you notice about the trends in operating versus finance leases for Microsoft? 2. Prepare a journal entry that summarizes the lease payments for Microsoft's finance leases during 2020. 3. Prepare a journal entry that summarizes the amortization of the right-of-use assets for Microsoft's finance leases during 2020. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare a journal entry that summarizes the lease payments for Microsoft's finance leases during 2020. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,00,000 should be entered as 10). No 1 Transaction 1 Lease payable Cash General Journal < Required 1 Required 3 > Debit Credit 947 336

Assessment Tool iFrame ) Lease Disclosures; Microsoft [LO15-2, 15-4, 15-8] "You know, we heard in our accounting class today that a few years ago, there were advantages to structuring lease arrangements as operating leases," your study partner said unexpectedly. "Now I'm wondering if that's changing things for companies that lease assets." Not happy with having to suddenly change your train of thought, but now curious, you open a new tab on your laptop and locate the following disclosure note in Microsoft's 2020 financial statements. We have operating and finance leases for datacenters, corporate offices, reasearch and development facilities, retail stores, and certain equipment. Our leases have remaining lease terms of 1 year to 20 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year. The components of lease expense were as follows: ($ in millions) 2020 Year Ended June 30, Operating lease cost Finance lease cost: $ 2,043 2019 $ 1,707 2018 $ 1,585 Amortization of right-of-use assets Interest on lease liabilities $ 611 336 $ 370 247 $ 243 175 Total finance lease cost $ 947 $ 617 $ 418 Supplemental cash flow information related to leases was as follows: ($ in millions) Cash paid for amounts included in the measurements of lease liabillities: Operating cash flows from operating leases Operating cash flows from finance leases Financing cash flows from finance leases Maturities of lease liabilities were as follows: ($ in millions) Operating Leases Finance Leases Year Ended June 30, 2021 $ 1,807 $ 880 2022 1,652 894 2023 1,474 903 2024 1,262 916 2025 1,000 1,236 Thereafter 3,122 7,194 Total leases payments 10,317 (1,030) 12,023 (2,527) $ 9,287 $ 9,496 2020 2019 2018 $ 1,829 336 $ 1,670 247 $ 1,522 175 409 221 144 Leass imputed interest Total Required: 1. What do you notice about the trends in operating versus finance leases for Microsoft? 2. Prepare a journal entry that summarizes the lease payments for Microsoft's finance leases during 2020. 3. Prepare a journal entry that summarizes the amortization of the right-of-use assets for Microsoft's finance leases during 2020. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare a journal entry that summarizes the lease payments for Microsoft's finance leases during 2020. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,00,000 should be entered as 10). No 1 Transaction 1 Lease payable Cash General Journal < Required 1 Required 3 > Debit Credit 947 336

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 17MCQ: Which of the following statements regarding the new accounting rules, which take effect in 2019, for...

See similar textbooks