Question
9-76 Capital Leases The Home Depot is the leading retailer in the home improvement industry and one of the 10 largest retailers in the United
9-76 Capital Leases
The Home Depot is the leading retailer in the home improvement industry and one of the 10 largest retailers in the United States. The company included the following on its January 29, 2012, balance sheet and footnotes ($ in millions):
Capital lease assets | $ 588 |
Capital lease obligations (long term) | $ 420 |
Capital lease obligations (current) | $ 29 |
Total capital lease obligations | $ 449 |
Total capital lease payments, scheduled for the fiscal year ending in 2013, are $106,000,000.
1. Prepare the journal entry for the $106,000,000 lease payments. Remember that the lease payments will include the principal payments due for the year plus interest expense accrued for the year.
2. Suppose that the capital lease assets have an average remaining life of 20 years and that no new leases are signed in the fiscal year ending in 2013. Compute the balance in the capital lease asset account and the total in the capital lease obligations account (long-term and current combined) as of the year ending in 2013.
3. Explain why the amount in the capital lease assets account is not equal to the amount in the lease obligations accounts.
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