AMR Corp. disclosed the following lease information in its 2011 annual report re
ID: 2647745 • Letter: A
Question
AMR Corp. disclosed the following lease information in its 2011 annual report related to its leasing activities (in millions).
Capital
Leases
Operating Leases
2012
$ 167
$ 1,176
2013
149
1,091
2014
129
942
2015
118
779
2016
78
685
Thereafter
477
5,940
Total
1,118
$10,613
Amount representing interest
(439)
Present value of net minimum lease payments
$ 679
a. What did AMR report on its 2011 balance sheet related to leases?
b. Calculate the lease-related liabilities that are potentially missing from AMRs 2011 balance sheet. Assume a discount rate of 11% and assume that the payments made in 2017 and beyond are made in 9 installments.
Capital
Leases
Operating Leases
2012
$ 167
$ 1,176
2013
149
1,091
2014
129
942
2015
118
779
2016
78
685
Thereafter
477
5,940
Total
1,118
$10,613
Amount representing interest
(439)
Present value of net minimum lease payments
$ 679
Explanation / Answer
Part A
AMR would recognize only the capitalized leases on its 2011 balance sheet.The total amount oflease liabilities that would appear is $679 million. We cannot determine the amount of leasedassets on the balance sheet from the footnote. But the net book value of these assets would beincluded in AMR’s balance sheet
Part B
Year Operating Lease Payment Discount Factor 11% Present Value 2012 1176 0.9009 1059 2013 1091 0.81162 885 2014 942 0.73119 689 2015 779 0.65873 513 2016 685 0.59345 407 2017 5940 5.53705*.59345 2251 lease-related liabilities 5804Related Questions
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