Goff Industries has applied for a loan and, as the bank loan officer, you’ve been assigned to evaluate Goff’s financial statements. Your evaluation reveals that Goff has no capital leases recorded on its financial statements while most other companies in its industry do have such leases. To effectively evaluate Goff’s financial position and compare it to industry standards, you’ve decided to constructively capitalize Goff’s operating leases. The following information is available from Goff’s financial statements for the year ended December 31, 2018: (Round all intermediate calculations to the nearest whole dollar.)
Minimum operating lease payments:

2019                   $ 1,000
2020                   $ 900
2021                   $ 820
2022                   $ 760
2023                   $ 700
2024 – 2027      $ 2,500

Assuming Goff’s long-term debt rate is 10%, what amount would you constructively capitalize in order to effectively analyze Goff’s financial position?

A). $11,504.
B). $3,22
C). $6,680.
D). $ - 0 – since the company has no capital leases.

Answer rating: 100% (QA)

C 6680 Explanation Am... View the full answer