Southwest Airlines reports total net operating assets of $8.466 million, nonoperating liabilities of $1.525 million, and equity of $6.941 in its 2007 10-K. Footnotes reveal the existence of operating leases that have a present value of $1,795 million (see Module 10 for computations).

a. What balance sheet adjustment(s) might we consider relating to the leases before we forecast financial statements for Southwest Airlines? (Hint: Consider the distinction between operating and nonoperating assets and liabilities.)

b. What income statement adjustment(s) might we consider? (Hint: Reflect on the operating and nonoperating distinction for lease-related expenses.)