– On June 30, 2018, Georgia-Atlantic, Inc., leased a warehouse facility from IC Leasing Corporation. – The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year lease term. – Payable each June 30 and December 31, with the first payment at June 30, 2018.

Question

1.43K viewsAugust 25, 2017

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Darshita 6.14K August 25, 2017 0 Comments

– On June 30, 2018, Georgia-Atlantic, Inc., leased a warehouse facility from IC Leasing Corporation.
– The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year lease term.
– Payable each June 30 and December 31, with the first payment at June 30, 2018.
– Georgia-Atlantic’s incremental borrowing rate is 10%, the same rate IC uses to calculate lease payment amounts.
– Depreciation is recorded on a straight-line basis at the end of each fiscal year.
– The fair value of the warehouse is $3 million.

Required:
1. Determine the present value of the lease payments at June 30, 2018 that Georgia-Atlantic uses to record the right-of-use asset and lease liability.
2. What pretax amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2018?
3. What pretax amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2018?

score 0 · Answer 1 · 2017-08-25T10:53:00+00:00

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