Answer A and B

a. Confirm that Verizon capitalized its capital leases using a rate of 3.85%. b. What effect does the failure to capitalize operating leases have on Verizons balance sheet? Over the life of its leases, what effect does this lease classification have on net income? E10-29. Analyzing and Interpreting Footnote on Operating and Capital Leases Verizon Communications Inc. provides the following footnote relating to leasing activities in its 10-K report. The aggregate minimum rental commitments under noncancelable leases for the periods shown at December 31, 2015, are as follows: Years ($ millions) 2016 2017 2018 2019 2020 Thereafter .... Capital Leases $302 278 187 97 Operating Leases $ 2,744 2,486 2,211 1,939 1,536 7,297 $18,213 45 159 Total minimum rental commitments ............. 1,068 111 Less interest and executory costs .............. Present value of minimum lease payments ....... Less current installments .. 957 271 Long-term obligation at December 31, 2015. ...... $686 a. Confirm that Verizon capitalized its capital leases using a rate of 3.85%. b. What effect does the failure to capitalize operating leases have on Verizons balance sheet? Over the life of its leases, what effect does this lease classification have on net income? E10-29. Analyzing and Interpreting Footnote on Operating and Capital Leases Verizon Communications Inc. provides the following footnote relating to leasing activities in its 10-K report. The aggregate minimum rental commitments under noncancelable leases for the periods shown at December 31, 2015, are as follows: Years ($ millions) 2016 2017 2018 2019 2020 Thereafter .... Capital Leases $302 278 187 97 Operating Leases $ 2,744 2,486 2,211 1,939 1,536 7,297 $18,213 45 159 Total minimum rental commitments ............. 1,068 111 Less interest and executory costs .............. Present value of minimum lease payments ....... Less current installments .. 957 271 Long-term obligation at December 31, 2015. ...... $686