9th Edition

ISBN: 9781260679694

Author: SPICELAND

Publisher: MCG

Concept explainers

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Videos

Textbook Question

Chapter 15, Problem 15.4BYP

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)

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 15, Problem 15.3BYP

Chapter 15, Problem 15.5BYP

Students have asked these similar questions

Consolidation Working Paper One Year after Acquisition, Bargain Purchase On January 1, 2022, Paxon Corporation acquired 90 percent of the outstanding common stock of Saxon Company for $1.8 billion cash. The fair value of the 10 percent noncontrolling interest in Saxon was estimated to be $150 million at the date of acquisition. Paxon uses the complete equity method to report its investment. The trial balances of Paxon and Saxon (in millions) Cash and receivables Inventory Equity method investments Investment in Saxon Dr(Cr) Paxon Saxon $3,225 $855 2,260 530 December 31, 2022, appear below: 2,441.5 Land 650 300 Buildings and equipment, net 3,600 1,150 Current liabilities (2,020) (1,200) Long-term debt (5,000) (450) (500) (50) Common stock, par value Additional paid-in capital Retained earnings, January 1 Dividends Sales revenue (1,200) (200) (2,410) (600) 500 250 (30,000) (12,000) Equity in net income of Saxon (616.5) Gain on acquisition (250) Gain on sale of securities (150) Cost of…

KIARA LIMITED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER: ASSETS Property, plant and equipment (cost) Accumulated depreciation Long-term investments Inventory Accounts receivable Company tax paid in advance Bank EQUITY AND LIABILITIES 2024 2023 R R 2 490 000 1 620 000 (630 000) 660 000 1 050 000 1 230 000 30 000 (480 000) 450 000 1 290 000 900 000 0 750 000 660 000 5 580 000 4 440 000 Ordinary share capital 2 700 000 2 000 000 Retained income 1 500 000 1 158 000 Long-term loan from Kip Bank (15%) 900 000 1 000 000 Accounts payable 480 000 228 000 Company tax payable 0 54 000 5 580 000 4 440 000 ADDITIONAL INFORMATION All purchases and sales are on credit. Interim dividends paid during the year amounted to R150 750. Credit terms of 3/10 net 60 days are granted by creditors.

Accounting Question

Chapter 15 Solutions

INTERMEDIATE ACCOUNTING (LL) W/CONNECT

Ch. 15 - Prob. 15.1Q Ch. 15 - Prob. 15.2Q Ch. 15 - Prob. 15.3Q Ch. 15 - A lessee should classify a lease transaction as a...Ch. 15 - Lukawitz Industries leased non-specialized...Ch. 15 - In accounting for a finance lease/sales-type...Ch. 15 - What is selling profit on a sales-type lease? How...Ch. 15 - At the beginning of an operating lease, the lessee...Ch. 15 - At the beginning of an operating lease, the lessor...Ch. 15 - In accounting for an operating lease, how are the...

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Solution Summary: The author explains that Company W leases rather than purchasing most of its premises because of the following reasons: Lease allows the company to safeguard assets.

Concept explainers

Videos

Want to see the full answer?

Chapter 15 Solutions