Wal-Mart Stores leases most of its office, warehouse, and retail space under a combination of capital and

Question:

Wal-Mart Stores leases most of its office, warehouse, and retail space under a combination of capital and operating leases. The disclosures related to capital leases for its fiscal year ending January 31, Year 5 follow (amounts in millions):

The weighted average discount rate used to compute the present value of the capitalized lease obligation was 7.25 percent. Assume that new leases capitalized and lease payments occur evenly throughout the year.
Required
a. Prepare an analysis that explains the change in the following accounts during Year 5.
(1) Property, Plant, and Equipment under Capital Leases
(2) Accumulated Depreciation
(3) Capitalized Lease Obligation
b. Assume that Wal-Mart treats these capitalized leases as operating leases for income tax purposes. The income tax rate is 35 percent. Compute the total amount of pretax expenses related to these leased assets for financial and tax reporting for Year 5.
c. Compute the amount of deferred tax asset and/or deferred tax liability that Wal-Mart would report on its January 31, Year 5, balance sheet related to these leases.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...