Analyzing and Capitalizing Operating Lease Payments Disclosed in Footnotes Costco Wholesale Corporation discloses the following in footnotes to its 10-K report relating to its leasing activities.

At the end of 2016, future minimum payments . . . under noncancelable leases with terms of at least one year were as follows ($ millions):

2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 200 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . 2,204 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,120 Operating leases are not reflected on-balance-sheet. In our analysis of a company, we often capitalize these operating leases, that is, add the present value of the future operating lease payments to both the reported assets and liabilities.

a. Compute the present value of Costco’s operating lease payments assuming a 6% discount rate and round the remaining lease term to the nearest whole year.

b. What effect does capitalization of operating leases have on Costco’s total liabilities and total assets (it reported total liabilities and total assets of $20,831 million and $33,163 million, respectively)?