Walmart Stores, Inc. is the world's largest retailer. A large portion of the premises that the company occupies are leased. Its financial statements and disclosure notes revealed the following information:

Balance Sheet

($ in millions)

Required:
1. Discuss some possible reasons why Walmart leases rather than purchases most of its premises.
2. The net asset "property under finance lease" has a 2016 balance of $6,345 million ($11,096 − 4,751). Liabilities for finance leases total $6,367 ($551 + 5,816). Why do the asset and liability amounts differ?
3. Prepare a 2016 summary entry to record Walmart's lease payments, which were $600 million.
4. What is the approximate average interest rate on Walmart's finance leases?

Transcribed Image Text:

2016 2015 Assets Property under capital lease Less: Accumulated amortization $11,096 $5,239 (2,864) (4,751) Liabilities Current liabilities: Obligations under finance leases due within one year 551 287 Long-term debt: Long-term obligations under finance leases 5,816 2,606