Calculation of Present Value of Operating Lease Payments and Lease Liability of Business
Question
1. Kling Technology disclosed the following minimum rental commitments under non-cancelable operating leases in its 2012 annual report:
|
Minimum operating lease payments |
Amount (in millions) |
|
2013 |
$ 86 |
|
2014 |
56 |
|
2015 |
44 |
|
2016 |
36 |
|
2017 |
32 |
|
2018 |
30 |
|
Total |
$284 |
What is the present value of these operating lease payments, assuming a 6% discount rate?
2. Taylor’s Corp. disclosed the following lease information in its 2011 annual report (in millions). What lease liability does Taylor’s report on its balance sheet?
|
|
Capital Leases |
Operating Leases |
|
2012 |
$1,000 |
$10,746 |
|
2013 |
1,000 |
11,022 |
|
2014 |
1,000 |
9,473 |
|
2015 |
1,000 |
8,841 |
|
2016 |
1,000 |
8,579 |
|
Thereafter |
19,500 |
121,524 |
|
Total |
24,500 |
$170,185 |
|
Amount representing interest |
(11,578) |
|
|
Net present value of leases |
$ 12,922 |
|
Summary
These short answer questions belong to Finance. The 1st question is about calculating the present value of operating lease payments at 6% discount rate and the 2nd question is about calculating the lease liability of a business.
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