Case: Lease concepts; Walmart
Wal-Mart Stores, Inc., is the world's largest retailer. A large portion of the premises that the company occupies are leased. Its financial statements and disclosure notes revealed the following information:
Balance Sheet
($ in millions)
2014 2013
Assets
Property:
Property under capital lease $5,589 $5,889
Less: Accumulated amortization (3.046) (3,147)
Liabilities
Current liabilities:
Obligations under capital leases due within one year 309 327
Long-term debt:
Long-term obligations under capital leases 2,788 3,023
Required:
1. Discuss some possible reasons why Walmart leases rather than purchases most of its premises.
2. The net asset "property under capital lease" has a 2014 balance of $2,543 million ($5,589 2 3,046). Liabilities for capital leases total $3,097 ($309 1 2,788). Why do the asset and liability amounts differ?
3. Prepare a 2014 summary entry to record Walmart's lease payments, which were $600 million.
4. What is the approximate average interest rate on Walmart's capital leases?