Following is the leasing footnote disclosure from United Parcel Service's (UPS) 20 I 2 10-K report.
Operating Leases $ 342 271 203 145 118 358 $1,437
1. Impute the discount rate that UPS uses, on average, to compute the present value of its capital leases.
2. What adjustments would we make to UPSs balance sheet to capitalize the operating leases at the end of 2012? (Hint: The implicit rate on its capital leases is approximately 7%; use this approximation to solve parts 2 and 3 if one cannot solve for the implicit rate.)
3. Assuming the same facts as in part 2, what income statement adjustments might we consider?
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