Northwest Airlines leases aircraft used in its operations. Information taken from its financial statements and notes for Year 3 and Year 4 follows (amounts in millions):

Notes to the Financial Statements
Leases: The present value of minimum lease payments under capital leases as of December 31, Year 3 and Year 4, when discounted at 8 percent, are as follows:

Minimum lease payments under operating leases asof December 31, Year 3 and Year 4, follow:

Required
a. Complete the following analyses relating to capital leases for Year 4. Assume that all cash flows occur at the end of the year and new capital leases were signed at the end of the year.

b. Determine the amount that Northwest would have reported as rent expense for Year 4 if it had treated all capital leases as operating leases.
c. Determine the amount reported as rent expense for Year 4 for all operating leases.
d. Compute the present value of commitments under operating leases on December 31, Year 3 and Year 4, assuming that 8 percent is an appropriate discount rate and that all cash flows occur at the end of each period. Cash flows after Year 5 occur in the same amount as those in Year 5 ($689 million when computing the present value at the end of Year 3 and $744 million when computing the present value at the end of Year 4) until the aggregate payments ($5,813 million and $5,857 million, respectively) have been made.
e. Assume that Northwest had capitalized all operating leases using the amounts computed in part d. Complete the following analysis for Year 4:

f. Northwest Airlines treats all of its leases as operating leases for tax purposes. The income tax rate is 35 percent and Northwest expects this rate to continue into the foreseeable future. Compute the amount of deferred tax asset or deferred tax liability that Northwest Airlines will recognize at the end of Year 3 and the end of Year 4. Indicate whether the change in the deferred tax asset or liability during Year 4 will increase or decrease income tax expense for the year.

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December 31, December 31, Balance Sheet Year 4 Year 3 Property Rights under Capital Leases (net $146 $361 $250 $419 Year 4 Year 3 Lease Payments on December 31: $ 93 Year4.. Year 5 79 53 52 Continued) Year 3 53 470 Year 4 Year 7 Year 8 59 47 s 778 Year 9. 36 421 ....$ 695 Total Less Imputed Interest 359) 419 5 361 Year 4 Year 3 Lease Payments on December 31: Year 5.... S 788 794 803 767 752 747 740 689 5,813 744 5,857 9,753 $9,512 Property Rights under Capital Leases, December 31, Year 3 New Capital Leases Entered Into during Year 4..... Amortization of Property Rights for Year 4.......................... Property Rights under Capital Leases, December 31, Year 4 Capitalized Lease Obligation, December 31, Year 3................... Increase in Capitalized Lease Obligation for Interest during Year 4........................................... New Capitalized Lease Obligations Entered Into During Year 4 Cash Payments under Capital Leases during Year 4..... Capitalized Lease Obligation, December 31, Year 4.... . . . . . Capitalized Value of Operating Leases, December 31, Year 3.... Increase in Capitalized Value for Interest during Year 4... New Operating Leases Capitalized during Year 4... Cash Payments under Capitalized Operating Leases Capitalized Value of Operating Leases, December 31, Year 4......