|OPERATIONAL LEASES TO CAPITAL LEASES|
|1||Gelson’s Markets has listed operating leases on its financial statements.|
|2||They have listed the value of operating leases for 2012 – through 2016 by each year and in total thereafter.|
|3||There are no capital leases on its books at the present time.|
|4||Use the operating lease figures for 2016 as the annual lease amounts for the future periods.|
|5||Use 5.6% as the cost of capital to discount the lease payments.|
|6||Use straight line depreciation to depreciate the leased assets over its life|
|7||You are required to convert these operating leases into capital leases by year and analyze its effect|
|on Gelson’s financial statements and key ratios for 2012.|
|8||Restate the income statement & balance sheet for 2012 after converting the operating leases to capital leases|
|(in millions of dollars)|
|INCOME STATEMENT: ($ in millions)|
|Income before interest & taxes||2500|
|Current Assets||$6,000||Current Liabilities||$3,750|
|Fixed Assets||3100||Long Term Liabilities||700|
|Total Assets||$9,100||Total Liab + Equity||$9,100|
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