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Analyzing and Capitalizing Operating Lease Payments Disclosed in Footnotes Costco Wholesale Corporation discloses the following in footnotes to its 10-K report relating to its leasing activities. At September 2, 2018, we operated 762 membership warehouses. Own Land and Lease Land Building and/or Building Total United States and Puerto Rico 527 426 101 Canada 86 14 100 38 1 39 22 6 28 Mexico United Kingdom Japan Korea 12 14 26 11 4 15 Taiwan 13 13 Australia 7 3 10 2 2 Spain Iceland - 1 1 France 1 1 Total 605 157 762 At September 2, 2018, our commitments to make future payments under contractual obligations were as follows: Payments Due by Fiscal Year 2020 to 2022 to 2024 and Contractual obligations 2019 2021 2023 thereafter Total Operating leases $227 $407 $358 $2,215 $3,207 Capital lease obligations 34 71 72 647 824 a. From these disclosures it appears that Costco has not yet adopted the new leasing standard. How do we know this? OHad Costco adopted the new standard, capital lease obligations and finance lease obligations would be reported. OHad Costco adopted the new standard, operating leases and finance lease obligations would be reported. OHad Cost adopted the new standard, operating leases, capital lease obligations, and finance lease obligations would be reported. OBased on the lease types disclosed, it appears Costco has adopted the new standard. b. How would Costco determine if each of the lease contracts listed under Lease Land and/or Building would be a finance lease or an operating lease? Finance leases meet one or more of five criteria. Which of the following is not one of the criteria? OThe lease term is for a major part of the remaining economic life of the underlying asset. OThe present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already included in the lease payments equals or exceeds substantially all of the fair value of the underlying asset. OThe underlying asset is of such that the company expects the asset to have an alternative use to the lessor at the end of the lease term. OThe lease transfers ownership of the underlying asset to the lessee by the end of the lease term. OThe lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise. C. From the disclosures details, do you think the Lease Land and/or Building leases are operating or finance lease

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