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Chapter 5: Q21BP-b (page 531)

The Ellis Corporation has heavy lease commitments. Prior to SFAS No. 13, it merely footnoted lease obligations in the balance sheet, which appeared as follows:

The footnotes stated that the company had $14 million in annual capital lease obligations for the next 20 years.

b. Construct a revised balance sheet that includes lease obligations, as in Table 16-7.

Short Answer

Expert verified

The assets and liabilities reported in the balance sheet are $226.024.

Step by step solution

01

Information available

Annual capital lease obligations = 14,000,000

Lease period = 20 years

Discount rate = 10%

Present value of lease payments = $86,024,000

02

Balance sheet

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