F. LEASES Note 9 below provides information about the Company's leases. (9) Leases The Company is committed under certain capital leases for rental of equipment, buildings, and land and certain operating leases for rental of facilities and equipment. These leases expire or become subject to renewal clauses at various dates from 2007 to 2043. Amortization of equipment under capital lease is included with depreciation expense. Rental expense charged to operations under operating leases for fiscal years 2007, 2006 and 2005 totaled approximately $201.0 million, $153.1 million and $124.8 million, respectively. Minimum rental commitments required by all noncancelable leases are approximately as follows (in thousands): Capital Operating 2008 S 1,787 $ 212,711 2009 2,029 269,386 2010 2,039 303,931 2011 2,049 311,785 2012 2,045 308,690 Future fiscal years 26.517 4,622,944 36,466 $ 6,029,447 Less amounts representing interest 17,082 Net present value of capital lease obligations 19,384 Less current installments 297 Long-term capital lease obligations, less current installments $ 19.087 The present values of future minimum obligations for capital leases shown above are calculated based on interest rates determined at the inception of the lease, or upon acquisition of the original lease. (1) What is the amount of capital leases included among Liabilities on the Balance Sheet at year-end fiscal 2007? (Note the balance sheet combines Capital Lease Obligations with Long- Term Debt, so take your value from Note 8 above and not from the Balance Sheet.) (2 points) (2) Prepare a journal entry to record lease payments for operating leases in fiscal 2007. (2 points) (3) Estimate the present value of the lease obligation if Whole Foods had capitalized all of its noncancelable operating leases. To simplify the analysis (and to allow use of a table), assume that: (4 points) Whole Foods noncancelable leases require equal annual payments of $301,500. The appropriate discount rate is 8%. Use annual compounding. Assume that lease payments extend until the end of fiscal 2027 (for a total of 20 annual periods beyond the end of fiscal 2007). C . F. LEASES Note 9 below provides information about the Company's leases. (9) Leases The Company is committed under certain capital leases for rental of equipment, buildings, and land and certain operating leases for rental of facilities and equipment. These leases expire or become subject to renewal clauses at various dates from 2007 to 2043. Amortization of equipment under capital lease is included with depreciation expense. Rental expense charged to operations under operating leases for fiscal years 2007, 2006 and 2005 totaled approximately $201.0 million, $153.1 million and $124.8 million, respectively. Minimum rental commitments required by all noncancelable leases are approximately as follows (in thousands): Capital Operating 2008 S 1,787 $ 212,711 2009 2,029 269,386 2010 2,039 303,931 2011 2,049 311,785 2012 2,045 308,690 Future fiscal years 26.517 4,622,944 36,466 $ 6,029,447 Less amounts representing interest 17,082 Net present value of capital lease obligations 19,384 Less current installments 297 Long-term capital lease obligations, less current installments $ 19.087 The present values of future minimum obligations for capital leases shown above are calculated based on interest rates determined at the inception of the lease, or upon acquisition of the original lease. (1) What is the amount of capital leases included among Liabilities on the Balance Sheet at year-end fiscal 2007? (Note the balance sheet combines Capital Lease Obligations with Long- Term Debt, so take your value from Note 8 above and not from the Balance Sheet.) (2 points) (2) Prepare a journal entry to record lease payments for operating leases in fiscal 2007. (2 points) (3) Estimate the present value of the lease obligation if Whole Foods had capitalized all of its noncancelable operating leases. To simplify the analysis (and to allow use of a table), assume that: (4 points) Whole Foods noncancelable leases require equal annual payments of $301,500. The appropriate discount rate is 8%. Use annual compounding. Assume that lease payments extend until the end of fiscal 2027 (for a total of 20 annual periods beyond the end of fiscal 2007). C
