Financial statement effect of capital and operating leases. Excerpts from the notes to the financial statements of FebUp corporation for two recent years reveal the following (amount in millions).

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

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

a. Assume that FedUp Corporation makes all lease payments at the end of each year. The interest rate implicit in capital leases is approximately 5%. Prepare an analysis that explains how the capital lease liability decreased from $401 million on May 31, 2007, to $310 million on May 31, 2008.
b. Prepare an analysis that explains how the capitalized leased asset decreased from $273 million on May 31, 2007, to $150 million on May 31, 2008.
c. Give the journal entries to account for capital leases during fiscal 2008.
d. Give the journal entries to account for operating leases during fiscal 2008.
e. Assume that 5% is an appropriate interest rate to compute the present value of operating lease commitments on May 31, 2007, and May 31, 2008. Compute the present value of operating lease commitments on each date. Assume that the operating lease payment in the fifth year continues at that amount ($1,045 million for the lease commitments on May 31, 2007, and $984 million for the lease commitments on May 31, 2008) until the firm has paid all commitments for years after 2012 and after 2013, respectively
f. Compute the long-term debt ratio and the debt-equity ratio on May 31, 2007, and May 3l, 2008, based on the reported amounts (that is, without capitalization of operating leases).
g. Repeat part g but capitalize the operating leasecommitments

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May 31 2008 2007 Capitalized Leased Asset Capital Lease Liability.. Long-Term Debt (including Capital Lease Liability). Total Assets ... Total Shareholders' Equity. $ 150 $ 310 $ 1,592 $22,690 $11,511 $ 273 $ 401 $ 2,427 $20,404 $ 9,588