Solution-Estimate the effect on the company income before

Estimate the effect on the company income before tax

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Reference no: EM132776143

At January 28, 2017, the Company was committed to non-cancelable leases with remaining terms of one to 15 years. A summary of operating lease commitments under non-cancelable leases follows (thousands):

2017 $187,674

2018 $187,397

2019 $178,595

2020 $169,856

2021 $155,670

Thereafter $538,635

Problem 1: Assuming that its operating leases relate to real estate, and that A&F depreciated such assets on a straight-line basis with no salvage value and useful life of 8 years, estimate the effect on the company's 2017 income before tax of capitalizing these operating leases. Use a 7% discount rate and round remaining lease life to the nearest whole year.

a. Reduce income before taxes by $10,585,000

b. Increase income before taxes by $187,674,000

c. Reduce income before taxes by $187,674,000

d. Reduce income before taxes by $198,259,000

Reference no: EM132776143

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Estimate the effect on the company income before tax

Reference no: EM132776143

Reference no: EM132776143

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