Accounting Homework Help

Accounting Homework Help Question

Q uestion

ACCT 322: Financial Reporting II


This assignment is based on Build-A-Bear Workshop Inc.  You will need to obtain a copy of the most recent Build-A-Bear Workshop Inc. annual report (for fiscal year 2012).  The project will develop your research, analytical and communication skills.  You will also have the opportunity to develop your critical thinking ability by applying, integrating and extending the knowledge you have gained in class.   


Analyze the implications for Build-A-Bear Workshop of a change in lease accounting consistent with current proposals by FASB and IASB.  You should write up your analysis in the form of a business memo (not just answers to the case questions).  Your memo should:

  • Incorporate the following and may include additional relevant information.
    1. What is an operating lease? What is a capital lease?
    2. Why do accountants distinguish between different types of leases?
    3. Calculate the present value of the minimum lease payments at December 29, 2012 (the final day of fiscal 2012). Assume the implicit rate of interest is 7%.  Use the future minimum lease payments disclosed in Note 11, Commitments and Contingencies. Assume that all lease payments are made on the final day of each fiscal year. Also assume that payments made subsequent to 2017 are made evenly over three years.
    4. If Build-A-Bear Workshop had entered into all of these leases on the last day of the year (December 29, 2012), what journal entry would the company have recorded if the leases were considered capital leases?
    5. What journal entry would the company record in fiscal 2013 for these leases if they were considered capital leases?
    6. What would the company have reported as “Property and equipment, net” at December 29, 2012? As Total assets?
    7. What would the company have reported as “Long-term obligations under capital leases” at December 29, 2012? As current liabilities? As Total liabilities?
    8. How would key financial ratios be affected? Consider the potential impact on the current ratio, debt-to-equity ratio, and long-term debt-to-equity ratio.
  • Explicitly state your conclusion – the likely implications of the change on Build-A-Bear.
  • Follow the format guidelines in the handout on writing business memos on the BbLearn.
  • Should be 2 pages plus table(s) or appendix with any supporting numbers/analysis. 

You may work on your own, with a partner or in a team of up to three students.  

Grading Considerations:

Grading will be based primarily on the effort shown for the case and will include the quality of your research, the effectiveness of your analysis, and the professional quality of your memo.

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