TJX Companies reports the following footnote relating to its capital and operating leases in its 2008 \(10-\mathrm{K}\) report.

Following is a schedule of future minimum lease payments for continuing operations as of January 26, 2008:

\section*{Required}

a. Confirm that the implicit rate on TJX's capital leases is \(7.1 \%\). Using the \(7.1 \%\) discount rate, compute the present value of TJX's operating leases. Explain the adjustments we might consider to its balance sheet and income statement using that information.

b. TJX reported total liabilities of \(\$ 4.5\) billion for 2008 . Would the adjustment from part a make a substantial difference to the company's total liabilities? Explain.

Transcribed Image Text:

Year ($ 000s) 2009. 2010 2011 $ 3,726 Capital Leases Operating Leases $ 943,174 3,726 898,667 3,726 809,288 2012 3.897 708,300 2013. 3,912 586,948 Later years. 11,084 1,715,321 Total future minimum lease payments 30,071 $5,661,698 Less amount representing interest... (7.689) Net present value of minimum capital lease payments.. $22,382