Financial statement effects of capital and operating lease. Excerpts from the notes to the financial statement of Northern Airlines for two recent years reveal the following (amounts in million).

Future minimum commitments under leases with lease periods extending beyond one year taken from notes to the financial statements for the year ending December 31, 2007, appear in the following table.

Future minimum commitments under leases with lease periods extending beyond one year taken from notes to financial statement for the year ending December 31, 2008, appear next.

a. Assume that Northern Airlines makes all lease payments at the end of each year. Prepare an analysis that explains how the capital lease liability decreased from $1,088 million on December 31, 2007, to $921 million on December 31. 2008.
b. Compute the weighted-average interest rate that Northern Airlines apparently used to compute the present value of capital lease commitments on December 31, 2007.
c. Prepare an analysis that explains how the capitalized leased asset decreased from $ l,019 million on December 31, 2007, to $865 million on December 31., 2008.
d. Give the journal entries to account for capital leases during 2008.
e. Give the journal entries to account for operating leases during 2008.
f. Assume that 10% is an appropriate interest rate to compute the present value of operating lease commitments on December 31, 2007, and December 31, 2008. Compute the present va1ue of operating lease commitments on each date. Assume that the operating lease payment in the fifth year continues at that amount ($815 million for the lease commitments on December 31, 2007, and $855 million for the lease commitments on December 31, 2008) until the firm has paid all commitments for years after 2012 and after 2013, respectively.
g. Compute the long-term debt ratio on December 31, 2007, and December 31, 2008, based on the reported amounts (that is, without capitalization of operating leases).
h. Repeat part g but capitalize the operating leasecommitments.

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December 31 2008 S 865 $ 927 $12,041 2007 Leased Asset $ 1,019 $ 1,088 $13,456 $29,495 Capital Lease Liability.. Long-Term Debt (including Capital Lease Liability). Total Assets. $29,145