Analyzing, Interpreting and Capitalizing Operating Leases (L01) The Best Buy Co., Inc. 10-K report has the following footnote related to leasing activities.

Required

a. What is the balance of the lease liabilities reported on Best Buy's balance sheet?

b. What effect has the operating lease classification had on its balance sheet? Over the life of the lease, what effect does this classification have on the company's net income?

c. Confirm that the implicit discount rate used by Best Buy for its capital leases is \(6.09 \%\). Use this discount rate to estimate the assets and liabilities that Best Buy fails to report as a result of its off balance-sheet lease financing. Round the remaining lease life to two decimals.

d. What adjustments would we make to Best Buy's income statement corresponding to the adjustments we made to its balance sheet in part \(c\) ?

e. Indicate the direction (increase or decrease) of the effect that capitalizing the operating leases would have on the following financial items and ratios for Best Buy: return on equity (ROE), net operating profit after tax (NOPAT), net operating assets (NOA), net operating profit margin (NOPM), net operating asset turnover (NOAT), and measures of financial leverage.

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The future minimum lease payments under our capital and operating leases by fiscal year (not including contingent rentals) at February 2, 2013, were as follows: Fiscal Year ($ millions) 2014. 2015 2016 2017 2018 ... Thereafter.. Subtotal Less: imputed interest Present value : ... .... Capital Leases $27 25 17 5 3 20 97 (17) $80 Operating Leases $1,238 1,156 1,034 888 703 1,994 $7,013