Please see attached for balance sheet and note 11

Problem 1:

Refer to the balance sheet and note 11 (Commitments) of Wal-Mart in Appendix.

Required:

• 1.Did Wal-Mart report a liability for its operating lease on January 31, 2015 balance sheet? By how much?

• 2.Did Wal-Mart report a liability for its capital lease on January 31, 2015 balance sheet? By how much?

• 3.Did Wal-Mart report an asset for its operating lease on January 31, 2015 balance sheet? By how much?

• 4.Did Wal-Mart report an asset for its capital lease on January 31, 2015 balance sheet? By how much?

5.Assuming an interest rate of 5%, compute the present value of the operating lease commitments on January 31, 2015. Show all calculations for credit.

• 6.Calculate the Liabilities to Assets ratio and Long-term Debt Ratio for Wal-Mart as of January 31, 2015, using the amounts originally reported in its balance sheet for the year.

• 7. Assuming that Wal-Mart was required to capitalize its operating lease, calculate the company?s 2015?s Liabilities to Assets ratio and Long-term Debt Ratio.

• 8. Comment on the results from part 6 and 7.

Problem 1: Refer to the balance sheet and note 11 (Commitments) of Wal-Mart in Appendix. Required: 1. Did Wal-Mart report a liability for its operating lease on January 31, 2015 balance sheet? By how much? 2. Did Wal-Mart report a liability for its capital lease on January 31, 2015 balance sheet? By how much? 3. Did Wal-Mart report an asset for its operating lease on January 31, 2015 balance sheet? By how much? 4. Did Wal-Mart report an asset for its capital lease on January 31, 2015 balance sheet? By how much? 5. Assuming an interest rate of 5%, compute the present value of the operating lease commitments on January 31, 2015. Show all calculations for credit. 6. Calculate the Liabilities to Assets ratio and Long-term Debt Ratio for Wal-Mart as of January 31, 2015, using the amounts originally reported in its balance sheet for the year. 7. Assuming that Wal-Mart was required to capitalize its operating lease, calculate the company's 2015's Liabilities to Assets ratio and Long-term Debt Ratio. 8. Comment on the results from part 6 and 7. Appendix Wal-Mart Stores, Inc. Consolidated Balance Sheets As of January 31, (Amounts in millions) 2015 2014 ASSETS 1 Current assets: Cash and cash equivalents $ Receivables, net 9,135 $ 7,281 6,778 6,677 45,141 44,858 2,224 1,909 460 63,278 61,185 Property and equipment 177,395 173,089 Less accumulated depreciation (63,115) (57,725) 114,280 115,364 5,239 5,589 (2,864) (3,046) 2,375 2,543 18,102 19,510 5,671 6,149 Inventories Prepaid expenses and other Current assets of discontinued operations Total current assets Property and equipment: Property and equipment, net Property under capital leases: Property under capital leases Less accumulated amortization Property under capital leases, net Goodwill Other assets and deferred charges Total assets $ 203,706 $ 204,751 $ 1,592 $ 7,670 LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND EQUITY Current liabilities: Short-term borrowings Accounts payable 38,410 37,415 Accrued liabilities 19,152 18,793 Accrued income taxes 1,021 966 Long-term debt due within one year 4,810 4,103 287 309 89 65,272 69,345 41,086 41,771 Long-term obligations under capital leases 2,606 2,788 Deferred income taxes and other 8,805 8,017 Obligations under capital leases due within one year Current liabilities of discontinued operations Total current liabilities Long-term debt 2 Redeemable noncontrolling interest 1,491 323 323 2,462 2,362 Retained earnings 85,777 76,566 Accumulated other comprehensive income (loss) (7,168) (2,996) Total Walmart shareholders' equity 81,394 76,255 Nonredeemable noncontrolling interest 4,543 5,084 85,937 81,339 Commitments and contingencies Equity: Common stock Capital in excess of par value Total equity Total liabilities, redeemable noncontrolling interest, and equity $ 203,706 $ 204,751 See accompanying notes. Note 1. Summary of Significant Accounting Policies ...... Property and Equipment Property and equipment are stated at cost. Gains or losses on disposition are recognized as earned or incurred. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred. The following table summarizes the Company's property and equipment balances and includes the estimated useful lives that are generally used to depreciate the assets on a straight-line basis: Fiscal Years Ended January 31, (Amounts in millions) Land Estimated Useful Lives N/A 2015 $ 26,261 2014 $ 26,184 Buildings and improvements 3-40 years 97,496 95,488 Fixtures and equipment 2-30 years 45,044 42,971 Transportation equipment 3-15 years 2,807 2,785 N/A 5,787 5,661 Construction in progress Property and equipment $ Accumulated depreciation Property and equipment, net 177,395 $ (63,115) $ 114,280 173,089 (57,725) $ 115,364 3 Leasehold improvements are depreciated over the shorter of the estimated useful life of the asset or the remaining expected lease term. Depreciation expense for property and equipment, including amortization of property under capital leases, for fiscal 2015, 2014 and 2013 was $9.1 billion, $8.8 billion and $8.4 billion, respectively. Interest costs capitalized on construction projects were $59 million, $78 million and $74 million in fiscal 2015, 2014 and 2013, respectively. 4 Note 9. Taxes Income from Continuing Operations The components of income from continuing operations before income taxes are as follows: Fiscal Years Ended January 31, (Amounts in millions) U.S. 2015 $ Non-U.S. Total income from continuing operations before income taxes 2014 18,610 $ 6,189 $ 2013 19,412 $ 19,352 5,244 24,799 $ 24,656 6,310 $ 25,662 A summary of the provision for income taxes is as follows: Fiscal Years Ended January 31, (Amounts in millions) 2015 2014 2013 Current: U.S. federal $ U.S. state and local 6,165 $ 6,377 $ 5,611 810 1,523 1,743 8,504 Total current tax provision 622 1,529 International 719 8,619 7,976 Deferred: U.S. federal (387) (72) 38 U.S. state and local (55) International (77) (479) (48) (519) (514) (18) Total deferred tax expense (benefit) Total provision for income taxes $ 7,985 37 $ 8,105 (8) $ 7,958 Deferred Taxes The significant components of the Company's deferred tax account balances are as follows: January 31, (Amounts in millions) 2015 2014 Deferred tax assets: Loss and tax credit carryforwards Accrued liabilities Share-based compensation Other Total deferred tax assets Valuation allowances Deferred tax assets, net of valuation allowance $ 3,255 $ 3,566 3,395 2,986 184 126 1,119 1,573 7,953 8,251 (1,504) (1,801) 6,449 6,450 Deferred tax liabilities: 5 Property and equipment 5,972 6,295 Inventories 1,825 1,641 Other 1,618 1,827 9,415 9,763 Total deferred tax liabilities Net deferred tax liabilities $ 2,966 $ 3,313 The deferred taxes are classified as follows in the Company's Consolidated Balance Sheets: January 31, (Amounts in millions) 2015 2014 Balance Sheet classification: Assets: Prepaid expenses and other $ 728 Other assets and deferred charges $ 822 1,033 1,761 1,973 56 176 4,671 5,110 4,727 Asset subtotals 1,151 5,286 Liabilities: Accrued liabilities Deferred income taxes and other Liability subtotals Net deferred tax liabilities $ 2,966 $ 3,313 Note 11. Commitments The Company has long-term leases for stores and equipment. Rentals (including amounts applicable to taxes, insurance, maintenance, other operating expenses and contingent rentals) under operating leases and other short-term rental arrangements were $2.8 billion in both fiscal 2015 and 2014 and $2.6 billion in fiscal 2013. Aggregate minimum annual rentals at January 31, 2015, under non-cancelable leases are as follows: (Amounts in millions) Fiscal Year 2016 Operating Leases $ 1,759 Capital Leases $ 504 2017 1,615 476 2018 1,482 444 2019 1,354 408 2020 1,236 370 10,464 3,252 Thereafter Total minimum rentals $ 17,910 $ 5,454 6 Less estimated executory costs 49 Net minimum lease payments 5,405 Less imputed interest Present value of minimum lease payments 2,512 $ 2,893 Certain of the Company's leases provide for the payment of contingent rentals based on a percentage of sales. Such contingent rentals were not material for fiscal 2015, 2014 and 2013. Substantially all of the Company's store leases have renewal options, some of which may trigger an escalation in rentals. The Company has future lease commitments for land and buildings for approximately 282 future locations. These lease commitments have lease terms ranging from 1 to 30 years and provide for certain minimum rentals. If executed, payments under operating leases would increase by $58 million for fiscal 2016, based on current cost estimates. In connection with certain long-term debt issuances, the Company could be liable for early termination payments if certain unlikely events were to occur. At January 31, 2015, the aggregate termination payment would have been $64 million. The arrangement pursuant to which this payment could be made will expire in fiscal 2019. 7