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"Wal-Mart Stores, Inc. operates retail stores in v...

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"Wal-Mart Stores, Inc. operates retail stores in various retailing formats in all 50 states in the United States. The company's mass merchandising operations serve its customers primarily through the operations of three segments. The Wal-Mart Stores segment includes its discount stores, Super-centers, and Neighborhood Markets in the United States. The SAM's Clubs segment include the warehouse membership clubs in the United States. The International segment includes all of its operations in Argentina, Brazil, Canada, China, Japan, Germany, Korea, Mexico, Puerto Rico and the United Kingdom. The company's subsidiary ,McLane Company, Inc. provides products and distribution services to retail industry and institutional foodservice customers. Information taken from Wal-Mart's fiscal year 2003 annual report follows: The Company and certain of its subsidiaries have long-term leases for stores and equipment. Rental (including for certain leases, amounts applicable to taxes, insurance, maintenance, maintenance, other operating expenses and contingent rentals) under all operating leases were $1,091 million, $1,043 million, and $893 million in 2003, 2002, and 2001, respectively. Aggregate minimum annual rentals at January 31, 2003, under no cancelable leases are as follows ( in millions): Note 9: Commitments Fiscal Year Operating Leases Capital Leases 2004 $589 $589 2005 576 431 2006 560 428 2007 546 419 2008 515 412 Thereafter 5202 3152 Total minimum-rentals $7,988 A Less estimated rentals $57 Net minimum lease payments B Less imputed interest at rates ranging from 6.1% to 14.0% C Present value of minimum lease payments D Excerpts from Wal-Mart's 2003 consolidated balance sheet follow: ($ in millions) 1/31/2003 Liabilities and Shareholders' Equity: Current Liabilities Commercial paper $1,079 Accounts Payable 17,140 Accrued Liabilities 8,945 Accrued income taxes 739 Long-term debt due within one year 4,538 Obligations under capital leases due within one year 176 Total Current Liabilities $32,617 Long-term debt $16,607 Long-term obligations under capital leases 3,001 Deferred income taxes and other 1,761 Total Long-term Liabilities $21,369 Required: 1. Solve for the unknowns (A, B, C, and D) in Note 9 2. Make the journal entry to account for Wal-Mart's fiscal year 2004 capital lease payment (Ignore allocating the executory cost portion because there is insufficient information to do so.) 3. Assume that the amount of Wal-Mart's operating lease payment due each year after 2008 its equal and is paid at the end a of each fiscal year. Assume that all of these leases terminate at the end of 2010. Using an interest rate of 8%, calculate the present value of the operating lease payments at January 31, 2003. C12-2. Wal-Mart: Lessee reporting - Capital versus operating lease treatment - Comprehensive Requirement 1: A. Total minimum rentals is just the sum of the annual payments of capital leases: 2004 2005 2006 2007 2008 2009 Total Sum of Annual Payments for Capital Leases 0 0 0 0 0 0 0 Total B. Net minimum lease payments is equal to: 0 Executory Costs 0 Net Minimum Lease Payments 0 C. Amount representing interest is equal to: Net Minimum Lease Payments 0 Present Value of Minimum Lease Payments 0 Interest 0 D. Present value of minimum lease payments: Total Present Value of Minimum Lease Payments 0 Obligations Under Capital Leases Due in 1 Year 0 Long-Term Obligations Under Capital Leases 0 Requirement 2: DR Interest expense (plug) $- DR Obligation under capital leases $- CR Cash $- a From current liability section of balance sheet. Represents portion of next lease payment that goes toward reduction of principal of lease obligation. (Note: Ignores the executory cost portion.) Requirement 3: The following table presents the calculation of the present value of the operating lease payments based on an interest rate of 8%. Year Operating Lease Payment PV Factor PV of Operating Lease at 8% 8% 2004 $- 0.92593 $- 2005 $- 0.85734 $- 2006 $- 0.79383 $- 2007 $- 0.73503 $- 2008 $- 0.68058 $- 2009 $- 0.63017 $- 2010 $- 0.58349 $- 2011 $- 0.54027 $- 2012 $- 0.50025 $- 2013 $- 0.46319 $- 2014 $- 0.42888 $- 2015 $- 0.39711 $- 2016 $- 0.3677 $- 2017 $- 0.34046 $- 2018 $- 0.31524 $- 2019 $- 0.29189 $- Total PV $-,sorry I need it tonight. Thanks for your help anyway,yes unless another tutor could answer in the specified time frame

 

Paper#5155 | Written in 18-Jul-2015

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