Question
The Abercrombie & Fitch 10-K report contains the following footnote relating to its leasing activities. This is the only information it discloses relating to its
The Abercrombie & Fitch 10-K report contains the following footnote relating to its leasing activities. This is the only information it discloses relating to its leasing activity.
At January 28, 2006, the Company was committed to non-cancelable leases with remaining terms of one to 15 years. A summary of operating lease commitments under non-cancelable leases follows (thousands):
2017 187,674
2018 187,397
2019 . 178,595
2020 . 169,856
2021 . 155,670
Thereafter 538,635
Assuming that its operating leases relate to real estate, and that A&F depreciated such assets on a straight-line basis with no salvage value and useful life of 8 years, estimate the effect on the companys 2006 income before tax of capitalizing these operating leases.
Use a 7% discount rate.
a. Reduce income before taxes by $10,585,000
b. Increase income before taxes by $187,674,000
c. Reduce income before taxes by $187,674,000
d. Reduce income before taxes by $198,259,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started