Reyes Corp. disclosed the following lease information in its 2016 annual report related to its leasing activities (in millions).

a. What effect does the failure to capitalize operating leases have on Reyes Corp.'s balance sheet? Over the life of the lease, what effect does this classification have on net income?
b. Calculate the lease-related liabilities that are potentially missing from Reyes's 2016 balance sheet. Assume a discount rate of 12% and round the remaining lease life to the nearest whole year.

Question

Reyes Corp. disclosed the following lease information in its 2016 annual report related to its leasing activities (in millions).
  
a. What effect does the failure to capitalize operating leases have on Reyes Corp.'s balance sheet? Over the life of the lease, what effect does this classification have on net income?
b. Calculate the lease-related liabilities that are potentially missing from Reyes's 2016 balance sheet. Assume a discount rate of 12% and round the remaining lease life to the nearest whole year.

Quizplus · Accepted Answer

The Answer of Reyes Corp. disclosed the following lease information in its 2016 annual report related to its leasing activities (in millions).
  
a. What effect does the failure to capitalize operating leases have on Reyes Corp.'s balance sheet? Over the life of the lease, what effect does this classification have on net income?
b. Calculate the lease-related liabilities that are potentially missing from Reyes's 2016 balance sheet. Assume a discount rate of 12% and round the remaining lease life to the nearest whole year.