Analyze the implications for Build-A-Bear Workshop of a change in lease accounting consistent with the new standard (Topic 842) released by FASB February 2016. You should write up your analysis in the form of a business memo (not just answers to the case questions). Your memo should:

Incorporate the following and may include additional relevant information.

Calculate the present value of the minimum lease payments at January 2, 2016 (the final day of fiscal 2015). Assume the implicit rate of interest is 7%. Use the future minimum lease payments disclosed in Note 9, Commitments and Contingencies. Assume that all lease payments are made on the final day of each fiscal year. Also assume that payments made subsequent to 2020 are made evenly over three years.

What journal entry would the Build-A-Bear need to record to recognize the right-to-use asset and related liability for the lease? Assume it is the same as the current treatment for capital leases.

What would the company have reported as Property and equipment, net at January 2, 2016? As Total assets?

What would the company have reported as Long-term obligations under capital leases at January 2, 2016? As current liabilities? As Total liabilities?

How are key financial ratios affected? Consider the potential impact on the current ratio, debt-to-equity ratio, and long-term debt-to-equity ratio.

What expense would the company record in fiscal 2016 for these leases under the new accounting method? (You will need to do your own research on this. I suggest a Google search as well as checking out the FASB Codification.)

Explicitly state your conclusion >> the likely implications of the change on Build-A-Bear.