AMR Corporation is the parent of American Airlines, one of the largest airline companies in the world. Excerpts from its 2009 annual report follow.

All questions relate to 2009 unless stated otherwise.
1. Solve for the unknowns (A, B, and C).
2. What is the net amount of capital lease assets on the balance sheet?
3. Why is the net amount of capital lease assets on the balance sheet different from the total amount of liabilities recorded on the balance sheet?
4. Compute AMR's Total debt to Total assets.
5. What entry would AMR make in 2010 to record the effects of capital leases existing at December 31, 2009? You may omit the depreciation entry.
6. What is the amount of operating lease obligation on the balance sheet?
7. What is the present value of operating lease payments? Assume a 13% discount rate.
8. What entry would be made to constructively capitalize the leases. Assume the net asset to liability ratio observed for the capital leases and ignore the effects of taxes.
9. Recompute the Total debt to Total assets ratio after making the entry in requirement 8.
What is the percentage change from the ratio computed in requirement4?

  • CreatedSeptember 10, 2014
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