Financial statement effects of operating and capital leases. Excerpts from the notes to the financial statements of Wal-Mart Stores for the year ending January 31, Year 9, appear below (amounts in millions).

Long-Term Lease Obligations. The company and certain of its subsidiaries maintain long-term leases for stores and equipment. Aggregate minimum annual rentals at January 31, Year 9, under leases appear below. Assume that Wal-Mart makes lease payments at the end of each fiscal year.

a. Prepare the journal entry to record cash payments under capital leases during fiscal Year 10.

b. Prepare the journal entry to record cash payments under operating leases during fiscal Year 10 .

c. Assume that the present value of Wal-Mart's operating lease commitments when discounted at 12 percent is \(\$ 1,586.5\) million on January 31, Year 9, and that these leases have a remaining life of 15 years. Give the journal entries to convert these operating leases into capital leases as of January 31 , Year 9, and to account for them as capital leases for the year ending January 31, Year 10.

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Fiscal Year Ending January 31: Year 10 Capital Leases $ 204.7 Operating Leases $ 249.3 Year 11 205.2 238.2 Year 12 204.6 229.6 Year 13 Year 14 After Year 14 204.8 220.7 204.7 224.1 2,859.7 2,409.6 Total $3,883.7 $3,571.5 Less Interest at 11 Percent. (2,189.5) Capital Lease Liability.... $1,694.2