(Please show me how you got the answers)

Analyzing and Interpreting Leasing Footnote The 2014 10 -K report of Target Corporation provides the following footnote ($ thousands). 21. Leases We lease certain retail locations, warehouses, distribution centers, office space, land, equipment, and software. Assets held under capital lease are included in property and equipment. Operating lease rentals are expensed on a straight-line basis over the life of the lease. . . . we determine the lease term by assuming the exercise of those renewal options that are reasonably assured. The exercise of lease renewal options is at our sole discretion. The lease term is used to determine whether a lease is capital or operating and is used to calculate straight-line rent expense. Additionally, the depreciable life of leased assets and leasehold improvements is limited by the expected lease term.

Rent expense is included in SG&A. Some of our lease agreements include rental payments based on a percentage of retail sales over contractual levels . . . Certain leases require us to pay real estate taxes, insurance, maintenance, and other operating expenses associated with the leased premises. These expenses are classified in SG&A consistent with similar costs for owned locations.

Most long-term leases include one or more options to renew, with renewal terms that can extend the lease term from one to more than fifty years. Certain leases also include options to purchase the leased property.

Future Minimum Lease Payments (in millions)	Operating Leases	Capital Leases
2015	$196	$133
2016	188	104
2017	180	68
2018	175	65
2019	164	64
After 2019	3,024	1,069
Total future minimum lease payments	$3,927	1,503
Less: Interest		624
Present value of future minimum capital lease payments		$879

a. Compute the present value of Target's operating leases. Assume a 6% discount rate. Round answer to the nearest whole number.

$Answer

b. If the operating leases are classified as capital leases, indicate how the amount in part a would be reported in Target's balance sheet using the financial statement effects template.

Balance Sheet
Transaction	Cash Asset	+	Noncash Assets	-	Contra Asset	=	Liabilities	+	Contrib. Capital	+	Earned Capital
To capitalize operating leases.	Answer	+	Answer	-	Answer	=	Answer	+	Answer	+	Answer

Income Statement
	Revenue	-	Expenses	=	Net Income
	Answer	-	Answer	=	Answer

c. Would recognition of the operating leases affect the current ratio?

-Recognition of the operating leases would increase the current ratio.

-Recognition of the operating leases would decrease the current ratio.

-Recognition of the operating leases has no affect on the current ratio.

d. Prepare journal entries to record the capitalization of Target's operating leases at the end of fiscal 2014. Enter them in the appropriate T-accounts.

General Journal
Date	Description	Debit	Credit
Jan. 3	Lease asset	Answer	Answer
	Leased liability	Answer	Answer

Leased Asset
	Answer	Answer

Lease Liability
	Answer	Answer

e. Do these leases represent a substantial fixed commitment to Target given Target's operating cash flow of $4,349 million in 2014 ?

Yes

No