AMR Corp. disclosed the following lease information in its 2011 annual report re

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 AMR’s 2011 balance sheet. Assume a discount rate of 11% and assume that the payments made in 2017 and beyond are made in 9 installments.

Explanation / Answer

AMR would recognize only the capitalized leases on its 2011 balance sheet. The total amount of lease liabilities that would appear is $679 million. We cannot determine the amount of leased assets on the balance sheet from the footnote. But the net book value of these assets would be included in AMR’s balance sheet.

*Present value of annuity factor for 9 years @ 11%** $685 × 5.53705 × 0.59345 = $2,25

year Operating Lease Payment Discount Factor Present Value 1 2012 1176 0.9009 1059.459 2 2013 1091 0.8116 885.4801 3 2014 942 0.7312 688.7823 4 2015 779 0.6587 513.1514 5 2016 685 0.5935 406.5142 6 Thereafter 5940 5.5371 2251

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.