Financial statement effects of operating and capital leases. Excerpts from the notes to the financial statements of American Airlines for a recent year reveal the following (amounts in millions):

December 31 Year 10 Year 11 Leased Asset (net of accumulated depreciation) $1,716 $1,878 Lease Liability $2,233 $2,403 Future minimum commitments under leases with lease periods extending beyond one year appear below.
Capi tal Leases Operating Leases December 31 December 31, December 31, December 31, •r = Year 10 Year 11 Year 10 Year 11 11 5 268 S 946 a 281 S 273 924 $ 982 13 268 300 920 967 :- 250 280 931 939 15 I : 276 912 954 240 270 915 961 2 164 2 440 14 463 16 420 S3. 716 1 483 $3,839 (1.436)
$20,011 $21,223 I s: :n $2,403

a. \ssume that American Airlines makes all lease payments at the end of each year. Prepare an analysis that explain^ how the liability for capital leases increased from S2.233 million on December 31, Year 10. to 52.403 million on December 31. Year 1 1.

b. Prepare an analysis that explains how the leasehold asset increased from SI. 7 16 million on December 31. Year 10. to S 1.878 million on December 31. Year 1 1.

c. Give the journal entries to account for capital leases during Year 1 1.

d. Give the journal entries to account for operating leases during Year 11.

e. The present value at 10 percent of Americans i>peratin? lease commitments is $7,793 mil- lion on December 31. Year 10. and S8.164 million on December 31. Year 1 1. The leases have an average remaining useful life of 22 years on each date. Prepare the journal entries to convert these operating lea^es into capital leases as of December 31. Year 10. and to nt for the leases as capital leases during Year 1 1.