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Real World Case 155 (Static) Lease Disclosures; Microsoft [LO15-2, 15-4, 15-8] You know, we heard in our accounting class today that a few years ago,

Real World Case 155 (Static) Lease Disclosures; Microsoft [LO15-2, 15-4, 15-8] You know, we heard in our accounting class today that a few years ago, there were advantages to structuring lease arrangements as operating leases, your study partner said unexpectedly. Now Im wondering if thats changing things for companies that lease assets. Not happy with having to suddenly change your train of thought, but now curious, you open a new tab on your laptop and locate the following disclosure note in Microsofts 2020 financial statements. We have operating and finance leases for datacenters, corporate offices, reasearch and development facilities, retail stores, and certain equipment. Our leases have remaining lease terms of 1 year to 20 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year. The components of lease expense were as follows: ($ in millions) 2020 2019 2018 Year Ended June 30, Operating lease cost $ 2,043 $ 1,707 $ 1,585 Finance lease cost: Amortization of right-of-use assets $ 611 $ 370 $ 243 Interest on lease liabilities 336 247 175 Total finance lease cost $ 947 $ 617 $ 418 Supplemental cash flow information related to leases was as follows: ($ in millions) 2020 2019 2018 Cash paid for amounts included in the measurements of lease liabillities: Operating cash flows from operating leases $ 1,829 $ 1,670 $ 1,522 Operating cash flows from finance leases 336 247 175 Financing cash flows from finance leases 409 221 144 Maturities of lease liabilities were as follows: ($ in millions) Operating Leases Finance Leases Year Ended June 30, 2021 $ 1,807 $ 880 2022 1,652 894 2023 1,474 903 2024 1,262 916 2025 1,000 1,236 Thereafter 3,122 7,194 Total leases payments 10,317 12,023 Leass imputed interest (1,030) (2,527) Total $ 9,287 $ 9,496 Required: What do you notice about the trends in operating versus finance leases for Microsoft? Prepare a journal entry that summarizes the lease payments for Microsofts finance leases during 2020. Prepare a journal entry that summarizes the amortization of the right-of-use assets for Microsofts finance leases during 2020.

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