Question

Let’s assume Estée Lauder entered into a five-year operating lease on January 1, 2021, for the new store in Chicago. They agree to pay $150,000 in year 1, $155,000 in year 2, $159,000 in year 3, $163,000 in year 4, $167,000 in year 5. Payments will be made at the end of each year.

First, calculate the ELC’s annual straight-line lease expense. (in thousands of dollars, round to the nearest integer) How do I input this in excel?

Answer 1

To calculate the annual straight-line lease expense for Estée Lauder (ELC), you can use the following formula in Excel:

Annual Straight-Line Lease Expense = Total Lease Payments / Number of Lease Years

In this case, the total lease payments for the five-year operating lease are $150,000 + $155,000 + $159,000 + $163,000 + $167,000 = $794,000.

The number of lease years is 5.

Now, input these values into Excel to calculate the annual straight-line lease expense:

1. In an empty cell, type "=794000/5" without the quotes.
2. Press Enter.

Excel will calculate the result, which should be $158,800 (rounded to the nearest integer).

So, the annual straight-line lease expense for Estée Lauder (ELC) is $158,800 (in thousands of dollars).