Question
The Aeropostale, Inc. 10-K report contains the following footnote relating to leasing activities. This is the only information it discloses relating to its leasing activity.
The Aeropostale, Inc. 10-K report contains the following footnote relating to leasing activities. This is the only information it discloses relating to its leasing activity.
We are committed under noncancelable leases for our entire store, distribution centers and ofce space locations . . . Certain leases also require contingent rent based on sales. The aggregate minimum annual real estate rent commitments as of February 2, 2013, are as follows
(in thousands):
Due in Fiscal Year (in thousands) | Total |
2013 | $143,978 |
2014 | 133,456 |
2015 | 120,403 |
2016 | 105,480 |
2017 | 94,011 |
Thereafter | 351,452 |
Total | 948,780 |
Question A: Using a 6% discount rate and rounding the remaining lease life to the nearest whole year, estimate the assets and liabilities that Aeropostale fails to report as a result of its off-balance-sheet lease nancing. Is below table correct?
Estimation of Liabilities: | |||
Fiscal Years | Estimated Lease rentals | Discount Factor@6% | Present Value-(In thousands) |
2013 | 143,978.00 | 0.94 | 135,828.30 |
2014 | 133,456.00 | 0.89 | 118,775.36 |
2015 | 120,403.00 | 0.84 | 101,092.68 |
2016 | 105,480.00 | 0.79 | 83,550.04 |
2017 | 94,011.00 | 0.75 | 70,250.49 |
Thereafter | 351,452.00 | 0.70 | 247,759.79 |
Total | 757,256.67 |
Question B. What adjustments would we consider to Aeropostales income statement corresponding to the adjustments we would make to its balance sheet in question A?
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