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In: Accounting
Reformulation for Multi-Year Capitalization of Operating Leases Use the information provided below for Southwest Airlines to...
Reformulation for Multi-Year Capitalization of Operating Leases
Use the information provided below for Southwest Airlines to answer the requirements.
| $ millions | 2013 | 2014 | 2015 |
|---|---|---|---|
| Net operating assets (NOA) | $ 7,337 | $ 6,812 | $ 7,818 |
| Net nonoperating obligations (NNO) | (332) | (296) | 127 |
| Total stockholders' equity | 7,669 | 7,108 | 7,691 |
| Net nonoperating expenses (NNE) | 119 | 118 | 106 |
| Net operating profit after tax (NOPAT) | 873 | 1,254 | 2,287 |
| Net income | 754 | 1,136 | 2,181 |
| Revenue | 18,810 | 19,716 | 20,931 |
Below are the adjustments that analysts would use to account for Southwest's operating leases as if they were capitalized. Adjustments are based on the present value of Southwest's operating leases for fiscal years 2013-2015.
| Balance Sheet Adjustments ($ millions) | 2013 | 2014 | 2015 |
|---|---|---|---|
| Net operating assets (NOA) | +3,267 | +4,244 | +3,188 |
| Net nonoperating obligations (NNO) | +3,267 | +4,244 | +3,188 |
| Equity | 0 | 0 | 0 |
| Income Statement Adjustments ($ millions) | 2013 | 2014 | 2015 |
|---|---|---|---|
| Interest expense | +129 | +167 | +126 |
| Net nonoperating expense, NNE | +81 | +105 | +79 |
| Net operating profit after tax, NOPAT | +81 | +105 | +79 |
| Net income | 0 | 0 | 0 |
a. Compute the following ratios using the unadjusted and the adjusted numbers for each year. For simplicity only, use year-end balances for NOA, NNO, and equity.
Round ROE, RNOA, and NOPM to one decimal place (ex: 0.2345 = 23.5%).
Round NOAT and FLEV to two decimal places.
Use negative signs with answers, when appropriate.
| 2013 | 2014 | 2015 | ||||
|---|---|---|---|---|---|---|
| Unadjusted | Adjusted | Unadjusted | Adjusted | Unadjusted | Adjusted | |
| ROE | Answer% | Answer% | Answer% | Answer% | Answer% | Answer% |
| RNOA | Answer% | Answer% | Answer% | Answer% | Answer% | Answer% |
| NOPM | Answer% | Answer% | Answer% | Answer% | Answer% | Answer% |
| NOAT | Answer | Answer | Answer | Answer | Answer | Answer |
| FLEV | Answer | Answer | Answer | Answer | Answer | Answer |
b. Does the lease capitalization make a large difference in any of these ratios?
Lease capitalization makes a large difference in both the RNOA and FLEV ratios.
Lease capitalization makes a large difference in both the ROE and RNOA ratios.
Lease capitalization makes a large difference in both the RNOA and NOPM ratios.
Lease capitalization makes a large difference in both the ROE and FLEV ratios.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
Reformulation for Multi-Year Capitalization of Operating Leases Use the information provided below for Southwest Airlines to...
Reformulation for Multi-Year Capitalization of Operating
Leases
Use the information provided below for Southwest Airlines to
answer the requirements.
$ millions
2013
2014
2015
Net operating assets (NOA)
$ 7,670
$ 7,145
$ 8,151
Net nonoperating obligations (NNO)
(332)
(296)
127
Total stockholders' equity
8,002
7,441
8,024
Net nonoperating expenses (NNE)
152
151
139
Net operating profit after tax (NOPAT)
906
1,287
2,320
Net income
754
1,136
2,181
Revenue
20,365
21,271
22,486
Below are the adjustments that analysts would use...
Use Southwest Airlines’ 2016 financial statement information,below to answer the following:Calculate Southwest Airlines’return...
Use Southwest Airlines' 2016 financial statement information,
below to answer the following:Calculate Southwest Airlines’
return on assets (ROA) for the year ending December 31, 2016.Disaggregate Southwest
Airlines' ROA into profit margin (PM) and asset turnover (AT).
Explain what each ratio measures.($
millions)Total operating
revenues$20,425Net income2,244Total assets,
beginning of year21,312Total assets,
end of year23,286Equity, end of
year8,441
Southwest Airlines provides scheduled air transportation services in the United States. Like many airlines, South-west leases...
Southwest Airlines provides scheduled air
transportation services in the United States. Like many airlines,
South-west leases many of its planes from Boeing
Company. In its long-term debt disclosure note included in
the financial statements for the year ended December 31, 2015, the
company listed $324 million in lease obligations. The existing
leases had an approximate ten-year remaining life and future lease
payments average approximately $45 million per year.
Required:
1. Determine the effective interest rate the company used to
determine...
ssume the data presented below are from the financial statements of JetBlue and Southwest Airlines. ($...
ssume the data
presented below are from the financial statements of JetBlue and
Southwest Airlines.
($ millions)
Jet Blue
Airways
Southwest
Airlines
Total Liabilities, 2013
$4,059
$10,326
Total Liabilities, 2012
5,003
8,815
Total Assets, 2013
6,593
15,463
Total Assets, 2012
6,549
14,269
Revenue, 2013
3,779
12,104
Net Income, 2013
237
629
Required
a. Compute the return on equity ratio for JetBlue and Southwest for
2013. (Round your answer to one decimal place.)
JetBlue Airways Answer%
Southwest Airlines Answer%
Which company...
Please complete a multi step income statement with the information provided. (Not all information provided may...
Please complete a multi step income statement with the
information provided. (Not all information provided may be relevant
in completing the question).
Inventory Information
Inventory on hand at the
beginning of October:
Units
Cost / unit
Total Cost
Purchase # 1
15
60
$900
Purchase # 2
25
70
1,750
40
$2,650
October 2018 transactions related to buying and
selling widget inventory
1-Oct
Sold 30 widgets at $125 each
on credit
3-Oct
Purchased 60 widgets at a cost of $80...
Use the information provided below, for Siyeza Traders for the financial year ended 28 February 20.8,...
Use the information provided below, for Siyeza Traders for the
financial year ended
28 February 20.8, to answer questions 1 to 3.
Siyeza Traders is an enterprise that sell motor vehicles in the
ordinary course of business at a
mark-up of 45% on cost. During the current financial period, Siyeza
Traders sold eight motor
vehicles for a cash price of R80 000 each (15% VAT inclusive).
Round your answer off to the
nearest Rand.
1. Income earned from the sale...
Use EDGAR or the company’s website to download the latest 10-K of Southwest Airlines Co. (fiscal...
Use EDGAR or the company’s website to download the latest 10-K
of Southwest Airlines Co. (fiscal year ending December 31, 2019).
Answer the following questions:
1. What is Southwest’s Balance Sheet Equation on December 31,
2019?
2. What is Southwest’s Net Income and Basic EPS (Earnings Per
Share) for the fiscal year ending December 31, 2019?
3. Did Southwest retain most of its Net Income from the fiscal
year 2019, or did the company declare some of it as dividends?...
The Millard Division's operating data for the past two years are provided below: Year 1 Year...
The Millard Division's operating data for the past two years are
provided below:
Year 1
Year 2
Return on investment
10
%
24
%
Net operating income
?
$
380,000
Turnover
?
4
Margin
?
?
Sales
$
3,210,000
?
Millard Division's margin in Year 2 was 120% of the margin in
Year 1.
The net operating income for Year 1 was:
Garrison 16e Rechecks 2017-10-31
Multiple Choice
$385,200
$160,500
$192,600
$190,000
Last year a company had sales of $370,000,...
Southwest Airlines sold flight equipment for $15 million cash at the end of its 7th year...
Southwest Airlines sold flight equipment for $15 million cash at
the end of its 7th year of use. The flight equipment originally
cost $21 million and was depreciated using the straight-line method
with $1 million residual value and a useful life of 20 years.
(a) Calculate the amount of depreciation expense recorded at the
end of the 7th year to bring depreciation up to date.
(b) After updating the depreciation, what is the equipment’s
book value at the end of...
Suppose you have been presented with selected information taken from the financial statements of Southwest Airlines...
Suppose you have been presented with selected information taken
from the financial statements of Southwest Airlines Co., shown
below.
SOUTHWEST AIRLINES CO.
Balance Sheet (partial)
December 31
(in millions)
2022
2021
Total current assets
$2,780
$4,300
Noncurrent assets
10,300
12,615
Total assets
$13,080
$16,915
Current liabilities
$2,780
$4,890
Long-term liabilities
6,480
5,190
Total liabilities
9,260
10,080
Shareholders’ equity
3,820
6,835
Total liabilities and shareholders’
equity
$13,080
$16,915
Other information:
2022
2021
Net income (loss)
$ 150
$ 685
Income tax...
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